MARKET OVERVIEW :

Four PSUs that doubled in 2024

RVNL, Cochin Shipyard: Four PSUs that doubled in 2024 and are already up 100% 

The Nifty PSE Index is currently trading at 13.4 times its one-year forward earnings against the five-year average of 8.3x.

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Shares of four state-run companies – Cochin Shipyard Ltd., Housing & Urban Development Corporation (HUDCO), Rail Vikas Nigam (RVNL) and IFCI have more than doubled in the first five months of 2024. Investors continue to bet on their improving fundamentals and strong order books.

While shares of Cochin Shipyard have nearly tripled so far this year, those of HUDCO, RVNL and IFCI have also gained between 100% to 110% in the first five months of the year. But what is the thread that links these four names, despite being from totally diverse sectors?

The fact that all four names had delivered over 100% returns in 2023 as well.

Cochin Shipyard’s net profit grew by over 157% from last year to ₹783 crore, aided by a 62% growth in its net revenue. The shipbuilder recorded full year revenue of ₹3,830 crore in financial year 2024.The stock gained as much as 10% intraday on Monday to hit a record high of ₹2,100 before cooling off. Cochin Shipyard received another international order from North Star Shipping, a top UK-based offshore renewable operator, for the construction of hybrid Service Operation Vessels (SOVs).
HUDCO, with its strong asset-liability profile is considered a niche player in its sector. Brokerage firm Elara Capital initiated coverage on the stock with a “buy” rating and a price target of ₹297 post its March quarter results, which implies a potential upside of close to 40% in the next 12 months. The brokerage expects HUDCO to be among the few NBFCs to see an NPA downcycle over the next few years.  However, unlike other PSUs, all of these four companies have adequate free float in the market. Free float is the total number of shares that are freely available in the market for trade. Stocks with low public float tend to skyrocket quickly due to the supply-demand mismatch and make valuations look expensive.

The government has a 75% stake in HUDCO, while its holdings in Cochin Shipyard, RVNL and IFCI ranges between 72% to 73% as per the latest shareholding data.

According to Bloomberg data, the Nifty PSE Index is currently trading at 13.4 times its one-year forward earnings against the five-year average of 8.3x. The gauge for state-owned stocks has rallied as much as 38% since January 2024. In contrast, the benchmark Nifty 50 is up close to 6% during the same period.

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