5 Budget Stocks: Time to buy before budget?

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5 Budget Stocks: I covered five stocks from five different sectors. These five stocks have massive potential as the Indian government is putting a lot of investment into these sectors. Everything I wrote will be data-backed.

In the interim budget, six sectors were identified by the Indian government with significant investments planned. These sectors are likely to remain in focus while the NDA government is in power for the next few years. Therefore, it is extremely important to understand key points about these stocks. The six sectors are Railways, Housing, Health, Energy, Environment, and Agriculture

5 Budget Stocks

1. Railways: RVNL (Rail Vikas Nigam Limited)

RVNL is a prominent player in the railway sector, showing impressive returns over the past year. Here are the key highlights:

Order Inflow: RVNL has secured several major orders recently, including contracts worth 138 crore INR from Central Railway, 187 crore INR from Maharashtra Metro Rail Corporation, and 202 crore INR from Southeastern Railway. Additionally, an MoU with a Middle Eastern African company signifies international expansion.
Revenue Visibility: As of May 2024, RVNL’s order book stands at 85,000 crore INR, almost four times its FY24 revenue of 21,000 crore INR.
Growth Projections: The management targets a 5% annual increase in the top line and a 15% increase in the bottom line over the next five years.
Diversification: RVNL is expanding beyond Indian Railways, securing projects in Bangladesh, Maldives, Sri Lanka, UAE, and Oman.
Business Model: Operating on a nomination basis and through competitive bidding, RVNL’s bidding projects typically offer higher margins.
Future Potential: RVNL aims to secure projects from the high-speed railway corridors announced in the interim budget.
Valuation Risk: Trading at a PE of 90, RVNL’s valuation is higher than its industry peers, posing a correction risk.

2. Housing: HUDCO (Housing and Urban Development Corporation)

HUDCO, a PSU NBFC, is set to benefit significantly from the government’s housing initiatives:

Government Initiatives: The announcement of an additional 2 crore houses over the next five years and a new scheme to aid middle-class housing purchases provides a strong tailwind.
Loan Book Growth: HUDCO has sanctioned 3.5 times the loans compared to FY23, with a total loan book of 92,000 crore INR. The company aims to grow this to 1.5 lakh crore INR by FY25.
Urban Infrastructure Focus: A significant portion of HUDCO’s loan book is dedicated to urban infrastructure, driving its growth.
Decreasing NPAs and Borrowing Costs: A decline in gross NPAs and borrowing costs indicates improved financial health.

3. Fertilizer: Paradeep Phosphates Limited (PPL) & Coromandel International Limited

The fertilizer sector is set for transformation with the introduction of Nano DAP:

Government Policy: The shift towards Nano DAP is aimed at reducing the hefty urea subsidy (₹1,90,000 crore for 2024-2025). Nano DAP has a more balanced nutrient profile, beneficial for soil health.
Paradeep Phosphates Limited (PPL): Despite a decline in revenue and profits in FY24, PPL is well-positioned to benefit from the shift to Nano fertilizers.
Coromandel International Limited: Leading the way, Coromandel International has already launched its Nano DAP application and is awaiting regulatory approval for commercial production. Its robust financial metrics (PE, PB, ROC, ROE) make it a strong contender.

4. Pipes and Fittings: PHX Industries Limited

PHX Industries manufactures pipes and fittings for the agriculture and plumbing/sanitation sectors:

Market Performance: The company has seen significant returns, especially in the last three months, driven by a better product mix and lower raw material costs.

5. FMCG: Hindustan Unilever Limited (HUL)

HUL remains a strong pick due to its position in both rural and urban markets:

Rural and Urban Tailwinds: Potential rural-friendly policies and income tax relief for urban consumers could drive growth.
Market Conditions: Despite stagnation in stock price over the last three years, HUL’s robust consumption patterns and market presence make it a reliable investment.

Conclusion of 5 Budget Stocks

The Indian government’s focus on key sectors such as Railways, Housing, Health, Energy, Environment, and Agriculture presents substantial investment opportunities. Stocks like RVNL, HUDCO, PPL, Coromandel International, PHX Industries, and HUL are well-positioned to benefit from these initiatives. As always, consider subscribing to financial updates and in-depth analyses to stay informed about these promising stocks.