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Look for opportunities in JK Tyres, Hyd Ind

There are some companies like J&K Tyres and Hyderabad Industries which has low PEs, high dividend yield, price to book value of less than 1, positive cash EPS and good profit growth .

J&K Tyres:

JK Tyres & Industries is the third largest player in its segment with industry P/E of around 12x and it is running currently at a P/E of 6.5 times. So, it is cheaper compared to peers in its segment and has a price to book value of 0.8x and a book value per share is about Rs 151. So, if you are buying that company, you are getting it at 80% of its value.

The dividend yield is 2.1% whereas EPS of about Rs 19 and cash EPS is at about Rs 43. That is very interesting compared to the Sensex dividend yield of less than 1%.

Certainly there is some institutional activity. DSP ML Fund, Reliance Cap Fund, HDFC MF, UTI MF, LIC, all hold together about 11% in this company.

Performance wise, this company is doing well. Sales growth has de-grown by about 3% because the auto sector in itself is slowing down. But the quarterly sales PAT growth over the last quarter is up 249%, and it is not backed by other income. Other income has declined by 27% and the 52-week underperformance on the Sensex is close to about 50% on that counter.

Hyderabad Industries:

The next hidden gem is Hyderabad Industries. It is in the cement products industry and the third largest player in its segment. Price to earnings ratio of about 7.8 times, the industry average is close to 11 times. Price to book value is again 0.8x, book value per share of about Rs 207. Dividend yield is an extraordinary 2.9%. EPS at about Rs 22, and cash EPS at about Rs 36.

ICICI Pru, LIC both hold together more than 6% on this counter. Performance wise, the sales growth during the previous quarter has de-grown by about 7%. But then PAT is up 402% and It is not backed by other income. The other income is actually 22%. And the 52-week underperformance to the Sensex is close to about 80%.

These may underperform in the absolute short-term. But in the long-term they give return on investments for investors.

Source: Moneycontrol.com