Top 5 PSU Companies in India by Growth

There is always a perception about stocks of Public Sector Undertakings (PSU) among investors that they erode wealth.

Well, they are not wrong. For almost a decade, PSU stocks have underperformed the market.

But the tables have turned now. Many of the top-performing stocks in the last year have turned out to be PSU stocks.

Stocks like Rail Vikas Nigam and Mazagon Dock Shipbuilders have given multibagger returns (over 300%) in the last year.

Strong fundamentals, the government's import ban, increasing order book, and expansion plans of the companies are driving this rally.

With PSU stocks becoming attractive by the day, we have shortlisted five PSU stocks with the highest growth in revenue and profit using Equitymaster India Stock Screener.

Take a look...

#1 Coal India

First on the list is Coal India, India's largest coal-producing company.

This 'Maharatna' company contributes 80% of the country's coal production. It supplies more than 80% of its production to the power sector.

The company's operations are spread across eight states with 318 mines and thirteen coal washeries. It has a total washing capacity of 24.94 metric tonnes (MT) per annum.

It offers a wide range of products, including coking coal, non-coking coal, washed and beneficiated coal, coke, tar, and other value-added products.

Some of its major consumers are power, cement, steel, and fertiliser companies.

The company has laid out big plans for growth.

It plans to invest Rs 15-20 billion (bn) per annum towards capex for the next three years. This capex is intended to increase its coal mining and washing capacity, improve its rail infrastructure, and set up thermal and solar power plants.

Apart from this, it also plans to improve the efficiency of transporting coal by investing in first-mile connectivity (FMC) projects. These will ultimately reduce its logistics cost.

Although the share of renewable energy is increasing in India, phasing out coal can be very difficult. It is clearly evident from the financials of Coal India.

In the last five years, the revenue of Coal India grew at a compound annual growth rate (CAGR) of 20%. This was on the back of high production and volume growth. The net profit also grew at a CAGR of 10% in this period.

The return on equity (RoE) and return on capital employed (RoCE) have been continuously improving. Their five-year averages are 49.8% and 69.2%, respectively.

Coal India is also a dividend aristocrat and has a rich dividend history. Ever since its listing in November 2010, the company has never missed a dividend payment. In the last ten years, not once has its dividend yield slipped below 5.6%.

Despite investing heavily in capex, the company's debt-to-equity ratio is 0.1x. This shows it has enough internal cashflows to fund its capex.

Coal India Financial Snapshot (2019-23)

Particulars (Rs m)	FY19	FY20	FY21	FY22	FY23
Total Revenue	581,302	569,315	499,250	615,556	1,448,030
Growth		-2.1%	-12.3%	23.3%	135.2%
Operating Profit	249,628	215,789	183,806	246,614	368,100
Operating Profit Margin	47.8%	42.7%	40.0%	42.8%	27.0%
Net Profit	174,644	167,003	127,022	173,784	281,250
Net Profit Margin	33.4%	33.1%	27.7%	30.2%	20.3%

Source: Equitymaster

Given its strong financials, monopoly status, and future plans, Coal India is poised for growth in the medium term.

To know more, check out Coal India's financial factsheet and latest quarterly results.

#2 RCF

Second on the list is Rashtriya Chemicals and Fertilizers (RCF).

The company is engaged in manufacturing and marketing industrial chemicals and fertilisers.

It manufactures a wide range of products. These include urea, complex fertilisers, industrial chemicals, and speciality nutrients. These find uses in making dyes, solvents, leather, pharmaceuticals, rubber, civil aviation, and agriculture

RCF has two manufacturing plants in India with a total production capacity of 3,030 MT across various products. It also has a robust distribution network which includes over 5,800 dealers across the country.

The company is undertaking several initiatives to expand its production capacity. It's setting up a coal gasification-based fertiliser plant along with Coal India. This plant with a capacity to manufacture 1.27 million (m) MT of urea.

It is also investing in reviving a fertiliser plant which entails setting up a urea plant of 1.27 m MT.

Apart from this, the company signed an MoU for setting up a nano urea fertiliser plant which will help the company diversify its offerings.

It is also installing a gas turbine at one of its plants. This will reduce energy costs. It's also setting up a brownfield nitrogen phosphorous potassium (NPK) plant as well as a greenfield ammonium nitrate plant.

The estimated cost of capex for all this is around Rs 105 bn, which the company will partly fund through debt. This shouldn't be a problem as the company's current debt-to-equity ratio is 0.3x. This gives RCF enough leverage to borrow.

In the last five years, the company's revenue has grown at a CAGR of 19.2%, driven by volume growth across all its products, especially urea. The net profit also grew by a CAGR of 48.7% due to cost-efficiency measures taken by the company.

The RoE and RoCE have improved from 4.4% and 11.2% to 21.1% and 21.06%, respectively, in the last five years.

RCF also pays regular dividends to its shareholders, and its current dividend yield stands at 3.3%.

RCF Financial Snapshot (2019-23)

Particulars (Rs m)	FY19	FY20	FY21	FY22	FY23
Total Revenue	90,186	98,768	84,451	129,809	216,890
Growth		9.5%	-14.5%	53.7%	67.1%
Operating Profit	4,084	4,333	7,229	10,866	14,720
Operating Profit Margin	4.6%	4.5%	8.7%	8.5%	7.0%
Net Profit	1,329	2,071	3,841	7,024	9,660
Net Profit Margin	1.5%	2.1%	4.6%	5.5%	4.5%

Source: Equitymaster

The company increasing its production capacity across all products. The management is also pushing to increase the production of chemicals and fertilisers through its subsidies. Thus the revenue and profit of RCF are expected to grow further in the medium term.

To know more, check out RCF's financial factsheet and latest quarterly results.

#3 Rail Vikas Nigam

Next on the list is Rail Vikas Nigam.

The company is engaged in the business of implementing rail infrastructure projects assigned by the Ministry of Railways.

Some of its projects include doubling, gauge conversion, building new lines and major bridges, and railway electrification.

The company also takes up projects to set up metro lines in metropolitan cities and suburban networks.

So far, the company completed 120 projects, 72 are under implementation, and three are yet to be sanctioned.

It also received orders from Tata Steel, NHAI, Madya Pradesh Metro Rail, and GMRCL to construct metro lines, railway corridors, and logistics parks.

Coming to its financials, in the last five years, the company's revenue has grown at a CAGR of 15.6%, driven by a healthy scale of operations. The net profit also grew by a CAGR of 15.6% during the same time.

Its RoE and RoCE have averaged 17.4% and 14.6% in the last five years.

The company has a rich dividend history with a five-year dividend payout and a dividend yield of 42.4% and 3.7%, respectively.

Rail Vikas Nigam Financial Snapshot (2019-23)

Particulars (Rs m)	FY19	FY20	FY21	FY22	FY23
Total Revenue	104,026	148,351	161,430	201,819	214,370
Growth		42.6%	8.8%	25.0%	6.2%
Operating Profit	6,420	7,733	9,486	12,866	12,470
Operating Profit Margin	6.4%	5.3%	6.2%	6.6%	6.0%
Net Profit	6,877	7,567	9,916	11,827	14,210
Net Profit Margin	6.8%	5.2%	6.4%	6.1%	7.0%

Source: Equitymaster

Currently, the company's order book stands at Rs 560 bn, of which railway orders are Rs 369 bn.

During the financial year 2023, it entered overseas markets and signed an MoU with Kyrgyzstan for an order worth approximately Rs 180 bn. It is planning to expand its overseas presence and take up projects in several other countries.

Rail Vikas Nigam received an order of 120 trains for the Vande Bharat project from the government of India. It is also actively bidding for several rail and metro rail projects in India.

All this shows that the company is geared up for growth in the medium term.

To know more, check out Rail Vikas Nigam's financial factsheet and latest quarterly results.

#4 Mazagon Dock Shipbuilders

Fourth on the list is Mazagon Dock Shipbuilders, a leading shipbuilding company in India.

Incorporated in 1934, the company is engaged in building and repairing passenger ships, cargo ships, destroyers, warships, water tankers, submarines, fishing trawlers, and corvettes for the Indian Navy and Indian Coast Guard.

It was taken over by the government of India in 1960. Since then, it has delivered 801 vessels, 27 warships, and seven submarines.

Mazagon Dock Shipbuilders is the only company that has built destroyers conventional submarines, and corvettes in India, for the Indian Navy.

This Miniratna company is currently executing a project to build four destroyers, of which two are already delivered. It is also the lead shipyard for building four Nilgiri Class Stealth Frigates.

The company has successfully indigenised equipment such as sonar domes, ship-installed chemical agent detection systems, bridge window glass, and remote-controlled valves.

This helped the company save costs, improve the quality of its products, and reduce dependence on imports.

In the last five years, the company's revenue has grown at a CAGR of 10.4%, driven by strong order inflow. The net profit also grew at a CAGR of 17.9% due to the indigenisation of products.

In the financial year 2023, Mazagon Dock Shipbuilders reported the highest-ever revenue of Rs 78 billion (bn) and the highest-ever net profit of Rs 10 bn. The revenue grew by 37% year-on-year (YoY), and net profit surged 83% during the same period.

Its RoE and RoCE stand high at 28.6% and 38.2%, respectively. The company also believes in sharing profits with its shareholders. In the last five years, its average dividend payout stood at 34.5%.

Mazagon Dock Ship Financial Snapshot (2019-23)

Particulars (Rs m)	FY19	FY20	FY21	FY22	FY23
Total Revenue	52,047	54,632	46,223	61,436	85,400
Growth		5.0%	-15.4%	32.9%	39.0%
Operating Profit	2,613	2,503	998	4,285	7,980
Operating Profit Margin	5.7%	5.1%	2.5%	7.5%	10.0%
Net Profit	4,704	3,772	4,535	5,631	10,730
Net Profit Margin	10.2%	7.7%	11.2%	9.8%	13.7%

Source: Equitymaster

At the end of the financial year 2023, the company's order book stood at Rs 387 bn. To intake more orders, the company is building a shipyard in Navi Mumbai spread over 40 acres with a capex of Rs 20 bn, which will be operational in the next seven years.

It is also looking to diversify its product portfolio and increase its presence in underwater, marine, heavy engineering, and offshore platform equipment.

Going forward, the government's phased ban on imports of defence items, and the growth plans of the company, will drive its revenue and profit growth in the medium term.

To know more, check out Mazagon Dock Shipbuilder's financial factsheet and latest quarterly results.

#5 Bharat Electronics

Last on the list is Bharat Electronics, a Navratna company.

Established in 1954 in association with CSF France, the company is now a government aerospace and defence company.

It manufactures a range of specialised electronic products for military as well as non-military use.

Bharat Electronics' product portfolio is broadly classified into defence & non-defence, which includes a slew of simple and complex products such as batteries, radars, electronic voting systems, and encryptors.

Apart from catering to the domestic market, it exports its products to several countries, including Botswana, Indonesia, Sri Lanka, Russia, the US, and South Africa.

It has nine manufacturing facilities and four research and development (R&D) facilities in India which help the company cater to its client's requirements and innovate its product offerings.

It is one of the biggest beneficiaries of the government's decision to put defence items under import embargo.

This has helped the company improve its financials. In the last five years, the revenue of the company has grown at a CAGR of 7.8%, driven by strong order inflow. The net profit also grew by a CAGR of 10.1% due to improved order execution.

As a result, the RoE and RoCE also improved consistently and currently stand at 22.8% and 30.1% respectively.

It also pays consistent dividends to its shareholders and has a five-year average dividend payout and dividend yield of 41.2% and 3.2%, respectively.

Bharat Electronics is also a zero-debt company giving it enough leverage to expand.

Bharat Electronics Financial Snapshot (2019-23)

Particulars (Rs m)	FY19	FY20	FY21	FY22	FY23
Total Revenue	123,789	132,984	142,623	156,220	180,150
Growth		7.4%	7.2%	9.5%	15.3%
Operating Profit	27,676	25,272	31,851	33,221	40,860
Operating Profit Margin	22.80%	19.50%	22.60%	21.60%	23.0%
Net Profit	18,480	17,926	20,693	23,545	29,860
Net Profit Margin	15.2%	13.8%	14.7%	15.3%	16.8%

Source: Equitymaster

As of January 2023, the company's order book stood at 501 bn. This shows good revenue visibility. Moreover, with the government increasing its defence budget and reducing the dependence on imports, the order book will will go up further.

Bharat Electronics recently ventured into lithium-ion cell technology for defence and electric mobility applications. For this, it established a pilot plant and developed three types of cells.

It has also received a letter of intent from Triton Electric Vehicle to procure 300-kilo watt (KW) lithium-ion battery packs for its semi-truck project at an estimated value of Rs 80 bn.

Bharat Electronics is also eyeing the drone space. It has signed an agreement with American drone delivery firm Dronedek to manufacture smart drone delivery mailboxes.

With the government's indigenisation push and its entry into the lithium-ion battery segment and drones, the company is poised for growth.

To know more, check out Bharat Electronics' financial factsheet and latest quarterly results.

Snapshot of top PSU companies on Equitymaster's Indian stock screener

Here's a quick view of the top PSU companies based on their financials.

Please note that these parameters can be changed according to your selection criteria.

This will help you identify and eliminate stocks not meeting your requirements and emphasise those stocks well inside the metrics.

Happy Investing!

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