The market’s relentless rise over the past year has made stocks pricier. But, we found 3 high-quality mid caps trading at attractive valuations.
Chambal earns 60% of its revenue from urea fertilisers and makes 12% of the country’s total urea output.
It has grown its revenue and net profit by 30% & 16% per annum between FY18-23, riding on the wide demand and supply gap of urea in India.
The dearth of urea output in India works in its favour. But high dependence on government subsidies makes its business volatile & working capital intensive.
Its trade receivables as a percentage of current assets touched 76% in FY20 due to delayed subsidy disbursements.
IGL & MGL are the leading state-run gas distributors in Delhi-NCR, and Mumbai, Urban Thane regions, respectively.
Their strong distribution infrastructure has enabled them to meet India's high demand for CNG (cheap auto fuel) and PNG (cooking gas) over the years.
This is how IGL and MGL grew their topline by a robust 26% and 23% per annum, respectively, between FY18-23.
However, the recent Delhi government policy that requires a complete shift of cab aggregators’ fleet to EVs by 2030 poses a major risk, especially for IGL.
The EV policy can impact 20% of IGL’s business (60% of CNG volumes come from Delhi). For MGL too, the government’s growing push for EVs is an overhang.
Both companies are focusing on diversifying into battery swapping and charging, along with LNG for long-haul heavy vehicles.
The duo’s long term prospects are intact given their diversification plans. Moreover, a fully electric infrastructure is still years away. Read the full story on the link below.