Exploring value opportunities in three Indian stocks

Despite a stagnant performance over the last 7 days, the Indian market has shown remarkable growth, rising 45% over the past year and earnings are expected to grow at 16% annually. In this context, it can be particularly interesting to identify undervalued stocks as they can offer significant value appreciation opportunities given this overall positive market trend.

Top 10 undervalued stocks in India based on cash flows

Click here to see the full list of 20 stocks from our Undervalued Indian Stocks Based on Cash Flows screener.

Let’s take a look at some of the best options from the screener.

Overview: Fusion Finance Limited is a non-banking finance company in India that provides micro-credit to women entrepreneurs in rural and semi-urban areas and has a market capitalization of around Rs 45.18 billion.

Operations: The company generates total revenues of around Rs 12,570 crore, mainly from microfinance activities.

Estimated discount to fair value: 10.8%

Fusion Finance is valued at ₹441.4 million against a fair value of ₹494.67 million, which may be undervalued by the market. With earnings growth forecast at 18.2% annually – outpacing the broader Indian market at 15.9% – and revenue growth of 24.8% also expected to be above average, the company’s financial performance appears robust despite recent regulatory challenges related to a GST notification of INR 1,179,000 crore, which the company considers manageable without significant impact on operations. However, concerns about debt coverage by operating cash flow and significant insider selling could raise caution among investors.

Overview: Inox Wind Energy Limited, along with its subsidiaries, is engaged in the manufacture and sale of wind turbines in India and has a market capitalization of approximately Rs 97,200 crore.

Operations: The company generates its revenue mainly through the production and sale of wind turbine generators totaling Rs 174.6 billion.

Estimated discount to fair value: 14.9%

Inox Wind Energy is currently trading at ₹8290.45, below its estimated fair value of ₹9744.8, and is showing signs of undervaluation based on cash flows. The company is expected to be profitable within three years, with revenue growth expected at 43.3% per annum – significantly higher than the Indian market average of 9.7%. Recent financials suggest a significant reduction in net loss and an impressive year-on-year increase in revenue, indicating an improvement in operating efficiency, although it remains difficult to achieve a positive net profit on a sustained basis.

Overview: Mahindra Logistics Limited is an integrated logistics and mobility solutions provider both in India and globally and has a market capitalization of around Rs 38,260 crore.

Operations: The company’s revenue comes primarily from two segments: Supply Chain Management, which generates ₹51.78 billion, and Enterprise Mobility Services, which contributes ₹3.28 billion.

Estimated discount to fair value: 42.1%

Mahindra Logistics is significantly undervalued at ₹524.75 billion based on a fair value estimate of ₹906.88 billion, reflecting the potential in cash flow valuation. Despite recent financial difficulties, including a net loss of INR547.4 million for FY2024, the company’s revenue growth is expected to outperform the market average of 11.8% annually. Strategic moves such as the formation of a joint venture with Seino Holdings are aimed at improving service offerings to the Japanese automotive industry in India, potentially strengthening future performance and market position.

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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 are not 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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