Buy the Dip: 2 PSU stocks that are trading near 52 weeks lows with Strong fundamentals

Synopsis:
Coal India and REC are two fundamentally strong PSU stocks which are currently trading close to their 52-week lows despite solid business performance. This presents a potential value-buying opportunity for investors looking to accumulate quality stocks at discounted levels.

Intro

Public Sector Undertakings (PSUs) often offer a unique blend of stability and long-term value, and two such players are Coal India and REC Ltd are currently hovering near their 52-week lows. Despite strong fundamentals, these stocks have seen a recent dip in prices, raising the question: Is this a smart opportunity for long-term investors to buy the dip? With favorable financials and market positioning, both companies may present compelling cases for value investing.

1. Coal India (52 Week Low- Rs. 349, CMP- Rs. 380)

Coal India Ltd (CIL) is a ‘Maharatna’ Public Sector Undertaking under Ministry of Coal, Government of India with headquarters at Kolkata, West Bengal. CIL is the single largest coal producing company in the world and one of the largest corporate employers.

Currently trading around Rs. 380, Coal India remains close to its 52-week low of Rs. 349, presenting a potential value-buying opportunity in a fundamentally strong PSU. The company boasts a high ROCE of 48.0% and ROE of 38.8%, reflecting efficient capital utilization and strong shareholder returns.

In FY 2024–25, Coal India delivered stable performance despite macro challenges. Net revenue stood at Rs. 1,43,369 crore, with PAT at Rs. 35,302 crore and EBITDA at Rs. 51,640 crore.

While revenue was slightly lower than the previous year, the company maintained a 12% CAGR in revenue and 29% CAGR in PAT since FY21. These strong financials and steady profitability underscore Coal India’s long-term value potential, even as it trades near historic lows.

JPMorgan has maintained a ‘Neutral’ rating on Coal India with a target price of Rs. 415, expecting volume growth from July–August due to a favorable base. Last year, sales were flat in July and fell 12% in August, offering potential upside.

2. REC (52 Week Low-Rs.  357, CMP-Rs.  401)

REC is a Central Public Sector Undertaking under the Ministry of Power involved in financing projects in the complete power sector value chain from generation to distribution.

In FY25, the company reported a 12% rise in net profit to Rs. 15,713 crore and a 19% increase in total income to Rs. 55,980 crore, driven by a robust 27% growth in net interest income. Its loan book expanded by 11% to Rs. 5.67 lakh crore, while asset quality improved significantly, with net credit-impaired assets declining to 0.38%. 

REC also reported a capital adequacy ratio of 25.99% and net worth growth of 13%, reflecting strong financial stability. Additionally, it offers a dividend yield of 4.00% and maintains a healthy dividend payout ratio of 29.8%. 

Operationally, working capital days reduced from 33 to 20, indicating improved efficiency. Strong returns ROE at 21.5% and ROCE at 9.96% make REC a compelling choice for long-term investors.

The global brokerage Morgan Stanley has set a price target of Rs 485 for REC. Morgan Stanley said it expects REC to deliver compound annual loan growth of 12% between FY25 and FY28, along with an average return on equity (ROE) of 17–19%.

Written by Manideep Appana

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