Top 3 Breakout Stocks to Watch Out (One of Them Looks Undervalued)

In the current bullish market, most stocks have climbed up the ladder, commanding rich valuations.

However, there are some undervalued plays available at a bargain.

Undervalued stocks offer a margin of safety in their valuations.

But what's interesting is if these undervalued plays are catching up with the momentum and showing signs of a bullish move that could last for months.

It's like a win-win situation if you play your cards right.

Today, we want to draw your attention towards three such stocks.

#1 Ganesh Housing Corporation

Ganesh Housing Corporation is part of the Ganesh Group founded in 1991. It has built a strong presence in and around Ahmedabad.

The company has one of the largest developable land banks in Ahmedabad of 500 acres.

It specialises in the residential sector, with a focus on the mid and higher-income segment of the market. It has entered the commercial, retail, and township formats of the industry.

In today's session, shares of the company spiked 20% to hit a new all-time high of Rs 610 on the BSE.

The steep rally comes after the realty developer posted strong numbers in the third quarter of FY24.

The company's net sales came in at Rs 1.8 bn, up 171.4% from Rs 668.5 million (m) reported in December 2022.

Net profit came at Rs 1 bn, up 376% compared to Rs 211.3 m in December 2022.

The company continues to remain debt free, coming off from a peak of Rs 6.5 bn in FY19.

One of its big landmark projects - Million Minds Phase 1 (IT SEZ) where construction is underway is approaching 30% completion.

In its earnings presentation, the management said that they anticipate robust cash inflows from upcoming projects.

With Union Budget 2024 approaching, investors could expect some positive momentum building up. As recent trends suggest, investors expect sops and reliefs for the sector and home buyers.

The company is all set to post bumper earnings for the full year FY24 as the earnings and sales have already shot up multi-fold compared to the previous year... and there's still one quarter to go.

Coming to its valuations, Ganesh Housing shares are trading at a PE multiple of 12.9x compared to its 5-year average of 23.6x.

If we look at the price to book value (P/BV) multiple, the stock is trading at a P/BV multiple of 3x compared to 5-year average of 1x.

With expectations of strong quarters ahead, the valuation multiples could go up and the company remains a top contender for re-rating.

To know more, check out its factsheet and its latest quarterly results.

#2 HUDCO

Housing & Urban Development Corporation (HUDCO) is a public limited company (Government of India undertaking).

Being majorly owned by the centre, the company receives support in terms of board representation and access to low-cost funds.

The company is primarily engaged in the business of financing housing and urban development activities in the country.

Over the years, HUDCO has played a significant role in the implementation of its various initiatives in urban infrastructure and social housing projects.

In the past five days, HUDCO shares have spiked 20%.

The current rally in HUDCO share price comes amid expectations of strong quarterly earnings and ahead of the budget, where a crucial topic would be the urbanisation trend of India.

On 27 December 2023, HUDCO signed a financing pact with Gujarat government to invest Rs 145 bn for financing housing and urban infrastructure projects in the state.

According to reports, the recently increased allocation for Pradhan Mantri Awaas Yojana will have positive effect on the housing activities.

No wonder HUDCO has received multiple rating upgrades from agencies on the back of its robust credit profile and strong government support.

It has a low credit risk as 97% of its outstanding loans are to state governments and their related entities, which come with guarantees.

HUDCO also rewards shareholders consistently by making large dividend payouts. It boasts a dividend yield of 2.5% on its current market price.

While growth has remained stagnant for the past three years, the company could see improvement in full year numbers given government's focus on housing infra.

To know more, check out its financial factsheet and its latest quarterly results.

#3 Voltamp Transformers

The third stock that saw a steep rally today is Voltamp Transformers.

Voltamp Transformers is a significant manufacturer of oil-filled power and distribution transformers.

The comprehensive product portfolio is a direct result of the company's technical collaborations with a myriad of pioneers in the world.

It boasts a well-diversified customer base of over 1,000 customers across various end-use industries such as power, oil refineries, textile, chemical, real estate, automobile, infrastructure, and steel.

In today's intraday session, Voltamp Transformers share price spiked over 10% to hit an all-time high of Rs 8,100 per share.

The rally could be attributed to momentum building up ahead of its Q3 earnings release.

The company recently informed exchanges that the management will meet on 29 January 2024 to approve its Q3 results.

Investors have started to realise and co-relate transformers to power needs and the sentiment has turned positive for Voltamp.

It has posted steady numbers for repeated quarters and the same is likely to continue going forward. As of September 2023, it had an order book exceeding Rs 14 bn.

The stock has done exceptionally well in the past few years. From 2021 to 2023, the stock has surged threefold. And now, it is trading at a PE ratio of 31x, well above its five-year median PE of 14x.

Despite the implied high valuations, FII's have invested heavily in the stock. They have amped up their stake from 14% in the quarter ending June 2023 to 22.3% in September 2023, marking a rise of 8.3%.

FIIs further increased their stake in the current quarter to 23.23%.

Given the energy transition, increased private investment, and government incentives in manufacturing, Voltamp Transformers is well-positioned for substantial growth.

To know more, check out Voltamp Transformers financial factsheet and its latest quarterly results.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...