Hardik
I agree the PSU’s were not so good in execution & the financial performance used to be lumpy and order book used to be poor.and therefore always used to carry a low P/E even though they used give a very good dividend yield of 8-10%. However , things seem to be changing under Modi Govt.
Not only Most PSU’s have healthy order book , but potential order in pipeline seems to be strong , thanks to Atma nirbhar Bharat and the worsening geo political situations.
In many PSU’s , there were changes in management and post that the quantum and quality of execution are improving quarter after quarter. For example for cochin shipyards
Shri Sreejith K Narayanan assumed charge as the Director (Operations) sometimes in mid 2022. From a net profit of 47 crore in March quarter of 2023 , Look at net profit figures of last 4 quarters of 2024 sequentially …109, 191, 248, 265…and market has liked this sequential growth and yoy growth.
If the market seems to have Re-rated the stock from 10 P/e TTM in April 2023 to 61P/e TTM now… it is not without a reason. similar valuation logic is also applicable for HAL, BEL, Bharat dynamic , BEML, Midhani and so on. In fact ,there are a dozen of pvt sector Defence stocks are trading still much higher than the defence PSU’s.
If you ask me if it can maintain the same growth or appreciation in stock price, it may be or may not be. there are many if’s though
If the order book soars further ( if india has to counter Chinese Navy ) and these companies expand capacities and there is continuance of Govt policy, and the companies are able to give these kind of market beating returns, the stock price may further rise…
However , if there is a policy break down with a different govt in power and govt shifts its focus from defence , then perhaps there many be a de-,rating of the stocks.
Having said that these kind of companies may or may not be able to give qoq sequential growth…cochin shipyards may be an exception .But we need to see yoy growth because ship building takes longer lead time .
As far as valuation is concerned, it is subjective. our views may vary from each other. At each price for every seller , there is a buyer and vice versa.No one is wrong here - every one does its own analysis before putting his money
only market and time could give us a lesson.
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