Incorporated more than 75 years ago, Godfrey Phillips brought together the K.K. Modi Group and US based Philip Morris. Though Godfrey comes a distant second to market leader ITC, the company has created its own space with such brands like Four Square, Red and White, Cavanders and North Pole. ROCE has averaged 28.5 per cent in the last five years. Net margins at 5.4 per cent (FY11) trail significantly below ITC’s 23 per cent.
Why Godfrey features in our list is its extremely low valuations - the stock trades at 0.86 times its five year PEG ratio and at a significant discount to ITC’s premiums. The low valuations have kept market interest in Godfrey for some time. It gained 60 per cent in the last 12 months while ITC gained about 28 per cent. YTD too the stock has gained 15 per cent while ITC remains flat. Yet, Godfrey is still 25 per cent below its 52 week high. Buy.
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