Rajesh Exports leads the trio of Indian stocks trading below estimated value

The Indian stock market has shown robust growth, rising 2.0% last week and an impressive 46% over the past 12 months, with earnings expected to grow at 16% annually. In such a thriving market, identifying stocks trading below their estimated value could present an opportunity for investors looking for potential growth at a reasonable price.

Top 10 undervalued stocks in India based on cash flows

Click here to see the full list of 21 stocks from our Undervalued Indian Stocks Based on Cash Flows screener.

Below we present a selection of stocks that our filter has filtered out.

Overview: Rajesh Exports Limited operates in India and is engaged in refining, manufacturing, wholesaling and retailing of gold and diamond jewellery and various gold products. Its market capitalization is around Rs 93.11 billion.

Operations: The company generates its revenue mainly from gold products and totals around ₹28.09 billion.

Estimated discount to fair value: 37.8%

Rajesh Exports, trading at ₹315.35, appears to be undervalued with an estimated fair value of ₹507.36, suggesting significant undervaluation. Despite low return on equity projections (8.2% in three years) and marginal improvements in net profit margin (0.1% versus 0.4% last year), the company is poised for robust earnings growth of 31.68% per annum, beating the Indian market’s forecast of 15.8%. This financial performance coupled with competitive pricing relative to peers highlights its potential as an undervalued stock on a cash flow basis.

Overview: RITES Limited provides consulting, engineering and project management services in various sectors including railways, highways and renewable energy, with a market capitalization of approximately ₹175.34 billion.

Operations: RITES Limited generates revenues from several segments including domestic consultancy Rs. 11.94 billion, domestic turnkey construction Rs. 9.03 billion, domestic leasing Rs. 1.38 billion, export sales Rs. 1.03 billion and overseas consultancy Rs. 0.95 billion.

Estimated discount to fair value: 22.1%

Currently trading at ₹729.65, RITES is considered undervalued with an estimated fair value of ₹936.11, which represents a significant discount. The company’s revenue and earnings are expected to grow at 13.4% and 18.54% annually, respectively, outperforming broader forecasts for the Indian market that call for 9.6% growth for revenue and 15.8% growth for earnings. However, dividend coverage is weak as dividends are not well covered by earnings or free cash flows, indicating potential challenges in sustainable distributions, despite recent strategic partnerships and deals that expand the scope of the business.

Overview: Texmaco Rail & Engineering Limited is an Indian and international engineering and infrastructure company with a market capitalization of approximately Rs 109.72 billion.

Operations: The company generates its revenue from three main segments: the freight wagon division, which generates about Rs 275 crore, and two infrastructure segments – electricity and rail and green energy – which generate about Rs 226 crore and Rs 527 crore respectively.

Estimated discount to fair value: 17.1%

Texmaco Rail & Engineering is trading at ₹274.67, below the estimated fair value of ₹331.36, suggesting slight undervaluation. The company’s earnings have grown 335% over the past year and are expected to grow at an annual rate of 28.9% over the next three years, beating the Indian market’s forecast of 15.8%. However, the share price has been very volatile recently and there has been share dilution over the past year, posing potential risks for investors considering cash flow-based valuation.

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This Simply Wall St article is of a general nature. We comment based solely on historical data and analyst forecasts, using an unbiased methodology. Our articles are not intended as financial advice. They do not constitute a recommendation to buy or sell stocks and do not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.

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