Top Value Stocks in India: Let’s say, you go shopping and find a suitcase priced at ₹ 5,000. You like it but hesitate to buy it because you feel that it is too expensive. In your opinion, it is worth about ₹ 3,500. At this point, you postpone your purchase and wait for a sale so that you get it at a discount.
In other words, you prefer buying things at an appropriate value. The suitcase serves the same purpose whether you buy it at ₹ 5,000 or ₹ 3,500. But, common sense tells us that buying it at ₹ 3,500 is a better deal.
When it comes to stocks, a few novice investors buy impulsively. However, the concept of buying at an appropriate value applies to stocks as well. The share price of a company’s stock keeps changing even when its value has remained the same.
Now, investors cannot wait for a Black Friday sale in the stock market. What they can do, though, is a little treasure hunt to find stocks available at a discount, or close to their worth.
In this article, we’ll understand the meaning of value investing, and reasons why stocks become undervalued, and take a look at 5 value stocks to watch in 2023. Keep reading to find out.
What is Value Investing?
Value investing is an investment strategy that involves picking stocks that appear to be trading at less than their value. Value investors typically analyze financial statements, results, business models, and other qualitative, quantitative, and perceptual data about companies to arrive at a measure called intrinsic value.
Intrinsic value, in simple words, is a measure of what an asset is worth. Value investors pick stocks that appear to be trading at less than their intrinsic value.
Some of the most famous names in the value investing community include Warren Buffet, Benjamin Graham, Charlie Munger, and Mohnish Pabrai among others. These investors find undervalued or deeply discounted stocks of strong companies and hold them for the long term to earn excellent returns.
When stocks are undervalued, it means that their intrinsic value is more than their market price, i.e., they are available at a discount. If the company has the potential to grow, the market price will eventually increase to reach its intrinsic value. This difference is used to make massive returns.
Why do stocks become undervalued?
Value investors believe that stocks become undervalued for a variety of reasons. For example, when an economy is performing poorly investors begin to panic and start selling. News, unexpected or disappointing earnings announcements by companies, product recalls, litigations, and herd mentality can push prices lower.
Some stocks may be trading at low prices because they are under the radar or are inadequately covered by analysts and the media.
Top Value Stocks in India to Watch in 2023
A few parameters that investors should look for while investing in value stocks are a company’s long-term business plans, its business principles, financial stability, the effectiveness of the management, and valuation multiples like price-to-earnings ratio, price-to-book value, price-to-sales, and the like. Here are five value stocks to watch in 2023:
Top Value Stocks in India #1 – CRISIL
CRISIL Limited is a globally diversified company that provides ratings, research, risk, and policy advisory services. It is one of the largest rating agencies in India and the foremost provider of high-end research to large banks and leading corporations.
| Year | 2018 | 2019 | 2020 | 2021 | 2022 |
| Total Income (in Crores) | ₹1,658.46 | ₹1,748.49 | ₹1,731.72 | ₹1,981.83 | ₹2,300.69 |
| Profit (in Crores) | ₹304.43 | ₹363.10 | ₹343.95 | ₹354.73 | ₹465.81 |
| Net Profit Margin | 18.36 % | 20.77 % | 19.86 % | 17.9 % | 20.25 % |
The company’s revenue grew at a CAGR of 8.53% and net profit grew at 11.22%. Its net profit margin has also increased over a period of five years.
| Particulars | Values | Particulars | Values |
| Face Value (₹) | 5 | ROE (%) | 11.55 |
| Market Cap (₹ in Cr) | 72,438.62 | PEG | 4.85 |
| EPS (₹) | 218.83 | Current Ratio | 1.77 |
| Stock P/E (TTM) | 19.89 | Debt to Equity | 0 |
| Industry P/E | 20.81 | Promoter’s Holdings (%) | 66.70 |
| Dividend Yield (%) | 0.7 | Price-to-Book Value | 13.72 |
The company’s shares are trading at a price-to-earnings ratio of 19.89, which is marginally lower than the industry P/E of 20.81, indicating that the stock is undervalued as compared to its peers. It has a price/earnings to growth ratio (PEG ratio) of 4.85 and a price-to-book value of 13.72.
Credit rating agencies generally trade at steep valuations on the back of an oligopolistic market, the asset-light nature of the business, limited capex requirement, and strong operating cash flows.
CRISIL ltd. is a large-cap company with a market capitalization of ₹ 72,438.62 crores. It has earnings per share (EPS) of ₹ 218.83 and a dividend yield of 0.7. It has an ideal debt-to-equity ratio of 0.02. Further, it has a return on equity of 11.55, and a good net profit margin of 20.25%. The company has a current ratio of 1.77, indicating that its current assets are nearly two times its current liabilities.
Top Value Stocks in India #2 – Bayer CropScience
Bayer CropScience is engaged in the Agri Care business which primarily includes the manufacture, sale, and distribution of insecticides, fungicides, herbicides, and various other agrochemical products and corn seeds.
| Year | 2018 | 2019 | 2020 | 2021 | 2022 |
| Total Income (in Crores) | ₹2,709.90 | ₹3,167.30 | ₹3,609.40 | ₹4,261.30 | ₹4,734.40 |
| Profit (in Crores) | ₹300.10 | ₹337.10 | ₹474.50 | ₹493.10 | ₹645.30 |
| Net Profit Margin | 11.07 % | 10.64 % | 13.15 % | 11.57 % | 13.63 % |
The company’s revenue grew at a CAGR of 7.76% and its net profit grew at a CAGR of an impressive 37.56%. The company’s net profit margin has also increased over a period of five years.
| Particulars | Values | Particulars | Values |
| Face Value (₹) | 10 | ROE (%) | 25.43 |
| Market Cap (₹ in Cr) | 19,702.39 | PEG | 1.90 |
| EPS (₹) | 156.36 | Current Ratio | 1.92 |
| Stock P/E (TTM) | 28.04 | Debt to Equity | 0 |
| Industry P/E | 13.54 | Promoter’s Holdings (%) | 71.43 |
| Dividend Yield (%) | 3.01 | Price-to-Book Value | 8.86 |
The company’s shares are trading at a price-to-earnings ratio of 28.04 compared to the industry P/E of 13.54. It has a price/earnings to growth ratio (PEG ratio) of 1.90.
Bayer CropScience is a mid-cap company with a market capitalization of 19,702.39 crores. It has earnings per share (EPS) of ₹ 156.36, a very good dividend yield of 3.01%, and an ideal debt-to-equity ratio of 0. It has paid hefty dividends in the past two years. Further, it has an excellent return on equity of 25.43, and a net profit margin of 13.63. The company has a current ratio of 1.92, indicating that its current assets are nearly double its current liabilities.
Top Value Stocks in India #3 – Bajaj Electricals
Bajaj Electricals is a part of the Bajaj Group of companies. It is a leading FMEG company spread across consumer products – appliances, fans, lighting, exports, and EPC – illumination, transmission towers, and power distribution. In addition, it has a presence in premium home appliances and cookware segments with its brands like Morphy Richards and Nirlep.
| Year | 2018 | 2019 | 2020 | 2021 | 2022 |
| Total Income (in Crores) | ₹4,707.45 | ₹6,679.41 | ₹4,987.23 | ₹4,584.60 | ₹4,813.01 |
| Profit (in Crores) | ₹94.20 | ₹155.97 | -₹7.44 | ₹188.96 | ₹124.41 |
| Net Profit Margin | 2 % | 2.34 % | – 0.15 % | 4.12 % | 2.58 % |
Its revenue grew at a CAGR of 0.56% and net profit at 11.34%. However, its net profit margin has grown sideways over the past five years.
| Particulars | Values | Particulars | Values |
| Face Value (₹) | 2 | ROE (%) | 7.57 |
| Market Cap (₹ in Cr) | 13,365.34 | PEG | 7.38 |
| EPS (₹) | 17.70 | Current Ratio | 1.21 |
| Stock P/E (TTM) | 65.78 | Debt to Equity | 0.03 |
| Industry P/E | 17.66 | Promoter’s Holdings (%) | 62.89 |
| Dividend Yield (%) | 0.28 | Price-to-Book Value | 7.18 |
The company’s shares are trading at a price-to-earnings ratio of 65.78 compared to the industry P/E of 17.66. It has a price/earnings to growth ratio (PEG ratio) of 7.38.
Bajaj Electricals is a small-cap company with a market capitalization of 13,365.34 crores. It has earnings per share (EPS) of ₹ 17.70, a dividend yield of 0.28%, and an ideal debt-to-equity ratio of 0.03. Further, it has a return on equity of 7.57, and a net profit margin of 2.58. The company has a current ratio of 1.21, indicating that its current assets are higher than its current liabilities.
Top Value Stocks in India #4 – Manappuram Finance
Manappuram Finance is a systemically important Non-Banking Finance Company (NBFC). It provides a wide range of fund-based and fee-based services including gold loans, money exchange facilities, and so on.
| Year | 2018 | 2019 | 2020 | 2021 | 2022 |
| Total Income (in Crores) | ₹3,420.76 | ₹4,179.51 | ₹5,465.32 | ₹6,330.55 | ₹6,061.02 |
| Profit (in Crores) | ₹675.97 | ₹948.55 | ₹1,480.32 | ₹1,724.96 | ₹1,328.70 |
| Net Profit Margin | 19.76 % | 22.7 % | 27.09 % | 27.25 % | 21.92 % |
The company’s revenue grew at a CAGR of 15.37% and net profit at 18.4%. Its net profit margin showed an increasing trend until 2021. However, it declined in 2022.
| Particulars | Values | Particulars | Values |
| Face Value (₹) | 2 | ROE (%) | 16.98 |
| Market Cap (₹ in Cr) | 9,788.56 | PEG | 0.62 |
| EPS (₹) | 15.88 | Current Ratio | 2.54 |
| Stock P/E (TTM) | 7.27 | Debt to Equity | 2.89 |
| Industry P/E | 25.73 | Promoter’s Holdings (%) | 35.20 |
| Dividend Yield (%) | 2.64 | Price-to-Book Value | 1.04 |
The company’s shares are trading at a price-to-earnings ratio of 7.27 which is significantly lower than the industry P/E of 25.73, indicating that the stock might be undervalued as compared to its peers. It has a price/earnings to growth ratio (PEG ratio) of 0.62, which is lower than 1 indicating that the stock might be fairly priced or even lower than one.
Manappuram Finance is a small-cap company with a market capitalization of ₹ 9,788.56 crores. It has earnings per share (EPS) of ₹ 15.88, a good dividend yield of 2.64%, and an ideal debt-to-equity ratio of 2.89. Further, it has a good return on equity of 16.98, and a net profit margin of 21.92%. The company has a low current ratio of 2.54 indicating that its assets are more than twice its liabilities.
Top Value Stocks in India #5 – Dr. Reddy’s Laboratories
Dr. Reddy’s Laboratories is a leading pharmaceutical company. It offers a portfolio of products and services, including Active Pharmaceutical Ingredients (APIs), Custom Pharmaceutical services (CPS), generics, biosimilars, and differentiated formulations.
| Year | 2018 | 2019 | 2020 | 2021 | 2022 |
| Total Income (in Crores) | ₹14,281.00 | ₹15,448.20 | ₹17,517.00 | ₹19,047.50 | ₹21,545.20 |
| Profit (in Crores) | ₹912.40 | ₹1,906.20 | ₹1,969.90 | ₹1,903.60 | ₹2,112.20 |
| Net Profit Margin | 6.39 % | 12.34 % | 11.25 % | 9.99 % | 9.8 % |
The company’s revenue grew at a CAGR of 10.83% and its net profit grew at a CAGR of 23.22%. In addition, its net profit margin has increased over the last five years.
| Particulars | Values | Particulars | Values |
| Face Value (₹) | 5 | ROE (%) | 11.55 |
| Market Cap (₹ in Cr) | 72,438.62 | PEG | 1.84 |
| EPS (₹) | 218.83 | Current Ratio | 1.82 |
| Stock P/E (TTM) | 19.89 | Debt to Equity | 0.18 |
| Industry P/E | 30.05 | Promoter’s Holdings (%) | 26.70 |
| Dividend Yield (%) | 0.7 | Price-to-Book Value | 3.29 |
The company’s shares were trading at a price-to-earnings ratio of 19.89 which is significantly lower than the industry P/E of 30.05, indicating that the stock might be undervalued as compared to its peers. It has a low price/earnings to growth ratio (PEG ratio) of 1.84, which is a good sign.
Dr. Reddy’s Laboratories is a large-cap company with a market capitalization of ₹72,438.62 crores. It has high earnings per share (EPS) of ₹ 218.83, a dividend yield of 0.7%, and an ideal debt-to-equity ratio of 0.18. Further, it has a return on equity of 11.55, and a net profit margin of 9.8%. The company has a low current ratio of 1.82 indicating that its assets are almost twice its liabilities.
In Closing
In this article, we took a look at the meaning of value investing, reasons why stocks become undervalued and 5 value stocks to watch in 2023. That’s all for this article. We hope to see you around. Happy investing until next time.
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