Assuming current dividend growth rate to be toned down to 5% and a cost of capital of 10%, when we do a DDM on the stock, the value stands at approx CMP.
But looking at the past, the dividends have grown from Rs 20 Cr in FY13 to Rs 565 Cr in FY24. Hence the 5% growth in dividends is a toned expectation.
Therefore the stock is significantly undervalued compared to its true value.
As for low operating margins, the business has never reported a PAT loss for the past 10Y, with ROCE above 15%. Hence we can assume the same to continue in the future.
Also it is run by professional management which reduce related party nature of transactions (as per crisil ratings report for the company).
Can accumulate if the dividend yield and earnings yield increases.
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