Best PSU stocks in India: Bulls in Public Sector

Just about a month back, Prime Minister Narendra Modi while addressing the Lok Sabha gave a piece of advice about investing in the best PSU stocks in India. He mentioned that these government-run companies are performing impressively and holding their own against competitors. The Prime Minister also highlighted that “some political parties used to spread false rumors about these companies, but in reality, they’ve grown stronger and more successful”.

One company that faced negative comments was HAL. There were claims that it was struggling and causing problems in India’s defense sector. The Prime Minister shared a tip for those interested in the stock market: “Here’s a gurumantra for those keeping an eye on the stock markets: consider investing in the PSUs that face criticism from the opposition, and you might see good returns”.

Over the last month, PSU stocks have increased significantly as a result of this witty suggestion that was provided during a session in the Lok Sabha in August. Even while the Prime Minister’s remarks weren’t quite a formal financial proposal, many investors were undoubtedly interested in them.
Since then, certain PSU stocks have experienced a noticeable increase. It’s noteworthy that this increase isn’t specific to any one demographic or sector. Several PSUs have seen a considerable increase in interest.

In the last month alone, the share prices of around 80 percent of the 55 PSU equities included in the BSE PSU and BSE PSU Bank indices increased by anywhere from 10 to an astonishing 75 percent. The crux of our discussion lies in identifying the top-performing PSU stocks in India. We’ll talk about various PSU stocks and their fundamentals. Without further ado, let’s embark on this exploration!

What is a PSU?

Public Sector Undertakings, or PSUs, are like big companies that are owned by the government. Because they work in so many various sectors, including those that produce goods, handle money, and supply energy, they are quite significant. Consider them as the way the government handles important firms. The growth and stability of the nation’s economy greatly depends on these PSUs. They ensure that we have access to necessities like power, financial services, and everyday items.
So, in simple terms, PSUs are like big government-backed companies that help keep our country running smoothly!

Read the full story: Bharat Electronics Limited Share Soar To New Heights: The Analysis

Recent Trends in Growth of PSUs in Indian Market

Surge in State-Run Companies’ Market Value Reflects Growing Confidence”

As per the data compiled and presented on the business column of CNBC- TV18, it’s quite noteworthy that according to data from Bloomberg, government-owned companies in India now hold a significant 13.3 percent chunk of the total market value, amounting to a whopping Rs 42 lakh crore. Over the past four years, there’s been an impressive surge of Rs 23 lakh crore in the combined market worth of these Public Sector Undertakings (PSUs), now standing at Rs 42 lakh crore. Notably, key players like SBI, LIC, NTPC, and Hindustan Aeronautics have played a major role, contributing to one-third of this substantial increase.

Interestingly, this surge in PSU market value comes at a time when these companies have been considered underperformers for quite some time. Investor interest in them has recently increased, indicating a renewed belief in their potential. Furthermore, when more firms entered into the public market, it wasn’t simply the stock prices that increased but also the whole market value of companies listed on the BSE. This suggests a wider pattern of rising investor interest in and confidence in the Indian market.

Also read: Fundamentally Strong Stocks In India: Smart Investments Unveiled

Best PSU stocks in India

The Best PSU Stocks in India are: SBI, HAL, ONGC, NTPC, BPCL, SAIL, Power Grid Corporation of India Limited, Coal India Limited, GAIL (India), National Aluminium Company Limited (NALCO), Bharat Electronics Limited (BEL), Container Corporation of India Limited (CONCOR), Bharat Heavy Electricals Limited (BHEL), Indian Oil Corporation (IOC), NMDC.

Also read IREDA Share Analysis: An Opportunity In The Renewable Market?

Facts about some of the Best PSU stocks in India

State Bank of India

52 Week High (15-Dec-2022): 629.55| 52 Week Low (01-Feb-2023): 499.35

Over the past five years, the bank has demonstrated an impressive Compound Annual Growth Rate (CAGR) in profits, achieving a remarkable 76% increase. In the preceding three years, this growth remained robust at 50%, and in the trailing twelve months (TTM), it stood at an impressive 65%.

Over the past five years, the company has experienced a compounded sales growth rate of 9%. In the preceding three years, the sales growth has also been at an impressive 9%. However, in the most recent twelve months (TTM), the company has witnessed a remarkable surge in sales, with a growth rate of 26%.

Turning our attention to stock performance, the bank has exhibited a Compound Annual Growth Rate (CAGR) in stock price of 17% over the last five years. This rate saw a substantial surge to 46% in the most recent three-year period, albeit tapering off to 5% in the trailing twelve months.

In terms of Return on Equity (ROE), the bank’s performance has been noteworthy. Over the last five years, it averaged at 10%. In the preceding three years, this metric saw an improvement to 13%, and in the trailing twelve months, it reached an impressive 17%.

Few shortcomings but overall commendable financial performance and its ability to generate consistent value for its stakeholders over the specified periods.

Also read: Best Shares To Buy For Long-Term Investment In India In 2023

Hindustan Aeronautics Ltd

52 Week High (11-Sep-2023): 4,170.00 | 52 Week Low (28-Sep-2022): 2,241.05

Over the past five years, HAL has demonstrated an impressive Compound Annual Growth Rate (CAGR) in profits, achieving a remarkable 24% increase. In the preceding three years, this growth remained robust at 28%, and in the trailing twelve months (TTM), it stood at 10%.

Over the past five years, the company has experienced a compounded sales growth rate of 8%. In the preceding three years, the sales growth has also been at 8%. However, in the most recent twelve months (TTM), the company has witnessed growth rate of 2%.

Talking about stock performance, HAL has exhibited a Compound Annual Growth Rate (CAGR) in stock price of 35% over the last five years. This rate saw a substantial surge to 68% in the most recent three-year period, albeit tapering off to 62% in the trailing twelve months.

In terms of Return on Equity (ROE), the HAL’s performance has been noteworthy. Over the last five years, it averaged at 25%. In the preceding three years, this metric saw an improvement to 27%, and in the trailing twelve months, it remained constant at 27%.

Summing up! The company has robust fundamentals and is profitable in its operations backed by several projects by the government in defence sector.

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Coal India Ltd

52 Week High (20-Sep-2023): 288.00 | 52 Week Low (27-Mar-2023): 207.60

The next company in the list of Best PSU stocks in India is Coal India Ltd. Over the past five years, Coal India Ltd. has demonstrated an impressive Compound Annual Growth Rate (CAGR) in profits, achieving a remarkable 32% increase. In the preceding three years, this growth remained robust at 19%, and in the trailing twelve months (TTM), it stood at 18%.

Talking about sales growth, the company has experienced a compounded growth rate of 10% over the past five years. In the preceding three years, the sales growth was equally impressive at 13%. However, in the most recent twelve months (TTM), the company witnessed a growth rate of 16%.

Switching gears to stock performance, Coal India Ltd. has exhibited a Compound Annual Growth Rate (CAGR) in stock price of 1% over the last five years. This rate saw a substantial surge to 32% in the most recent three-year period, albeit tapering off to 24% in the trailing twelve months.

In the realm of Return on Equity (ROE), Coal India Ltd.’s performance has been noteworthy. Over the last five years, it averaged at 52%. In the preceding three years, this metric saw an improvement to 47%, and in the trailing twelve months, it remained constant at 56%.

Read the complete Coal India Share Analysis: Key Insights

GAIL (India) Ltd

52 Week High (11-Sep-2023): 129.55 | 52 Week Low (26-Sep-2022): 83.00

Over the last five years, GAIL (India) Ltd. displayed varying performance in profits. The Compound Annual Growth Rate (CAGR) for this period resulted in a modest 3% increase. However, in the preceding three years, there was a slight decline with a steady -16% growth. In the most recent trailing twelve months (TTM), there was a substantial decrease of -69%, indicating a challenging period for the company in terms of profit margins.

In sales, the company experienced consistent growth, with a CAGR of 22% over the past five years. The preceding three years also saw robust growth at 26%. However, in the most recent TTM, there was a commendable growth rate of 24%.

Turning to stock performance, GAIL (India) Ltd. showed a fluctuating trend. The CAGR in stock price was -1% over the last five years. However, there was a notable surge to 26% in the most recent three-year period, followed by a rise to 36% in the trailing twelve months.

In terms of Return on Equity (ROE), GAIL (India) Ltd.’s performance has been notable. Over the last five years, it averaged at 15%. In the preceding three years, there was an improvement, standing at 14%. In the trailing twelve months, it remained stable at 9%.

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Bharat Petroleum Corporation Ltd

52 Week High (07-Jul-2023): 397.90 | 52 Week Low (20-Oct-2022): 288.05

Over the past five years, Bharat Petroleum Corporation Limited has demonstrated varying performance in profits. The Compound Annual Growth Rate (CAGR) for this period resulted in a modest decrease of -18%. In the preceding three years, there was a slight decline with a steady growth of -9%. However, in the most recent trailing twelve months (TTM), there was an exceptional increase of 607%.

In sales, the company experienced consistent growth, with a CAGR of 15% over the past five years. The preceding three years also saw robust growth at 18%. However, in the most recent TTM, there was a commendable growth rate of 17%.

Shifting focus to stock performance, BPCL displayed a fluctuating trend. The CAGR in stock price was -1% over the last five years. However, there was a notable decline to -9% in the most recent three-year period, followed by a rise to 5% in the trailing twelve months.

In terms of Return on Equity (ROE), BPCL’s performance has been notable. Over the last five years, it averaged at 17%. In the preceding three years, there was an improvement, standing at 18%. In the trailing twelve months, it averaged at 6%.

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Facts to Consider while looking for the Best PSU stocks in India

When considering the best PSU stocks in India, focus on these three crucial factors:

Financial Resilience: It’s crucial to favor companies with a solid financial history. This comprises a steady increase in income, a profit margin that is healthy, and debt that is under control.

Government Policies and Rules: Stay updated on government policies and regulations that directly impact the sectors in which these PSUs operate. Positive shifts in policy can serve as a strong growth catalyst, while adverse policies may have the opposite effect.

Industry and Market Insights: Look at the bigger economic picture to see how it affects the potential growth of this sector. Keep an eye on what’s happening in the market, who the competitors are, and the overall trends.

Opting for a PSU in a thriving industry often leads to more favorable long-term returns.

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BOTTOM LINE

In the dynamic world of PSU stocks, it’s like picking stars in the night sky – each one shines uniquely. Remember, financial decisions are like crafting your own story. So, trust your instincts, stay curious, and keep exploring. Who knows, the next big star might just be waiting for you to spot it. Happy Reading!

Disclaimer

The blog is meant for informational purposes and serves the general analysis of the stocks. Contents provided here are based on careful research and analysis utilizing the fundamental and technical indicators over a period of time. The post does not consist any direct recommendation about Investing or trading in the securities market. Thorough research and careful consideration are necessary for individuals to fulfill their personal responsibility in making financial decisions. Seeking professional advice before making any financial decisions is always advisable.