The Indian stock market in 2024 largely trended upward, propelled by strong domestic growth, resilient corporate earnings, and sectoral outperformance in financials, real estate, and manufacturing.
Benchmarks like Nifty and Sensex hit all-time highs, fuelled by robust inflows, “China+1” manufacturing tailwinds, and increasing retail participation.
However, the last quarter brought a bout of volatility. Geopolitical tensions, fluctuating global interest rates, profit-booking, and concerns over lofty valuations, kept investors on edge. Despite these swings, markets have started stabilising, signalling brighter possibilities for 2025.
Through it all, one thing remains unchanged: the hunt for fundamentally strong, undervalued stocks. Companies with sound financials and growth potential are always in focus, offering opportunities to those with a long-term lens.
So with this in mind, we introduce 5 best deep value stocks to watch out in 2025. These stocks are filtered using Equitymaster’s powerful stock screener.
#1 Power Finance Corporation
At the top of the list is Power Finance Corporation (PFC).
PFC is a prominent player in India’s power financing landscape, focusing on providing loans for a wide range of power projects.
As a leading non-banking financial company (NBFC), it plays an essential role in financing power generation, transmission, and distribution projects, with an emphasis on large-scale government-backed initiatives.
PFC Financial Snapshot (2020-24)
| 2019-2020 | 2020-2021 | 2021-2022 | 2022-2023 | 2023-2024 | |
| Net Interest Income Growth (%) | 9.60% | 26.40% | 17.00% | -3.20% | 8.40% |
| Net Interest Margin (%) | 34.30% | 37.60% | 41.40% | 39.40% | 36.30% |
| Net Profit Growth (%) | -25.02% | 65.83% | 19.42% | 12.84% | 24.94% |
| Return on Assets (%) | 1.00% | 1.50% | 1.80% | 1.80% | 1.90% |
| Return on Equity (%) | 14.40% | 19.30% | 19.60% | 18.90% | 19.50% |
Source: Equitymaster
As far as financials go, PFC has done well between 2020-2024. Its interest income and net profit have grown at a CAGR of about 12% and 14.9%.
In India’s current energy transformation phase, PFC stands to benefit significantly from the robust capex push, especially in renewable energy expansion and infrastructure upgrades.
The company’s expertise in handling low-risk, state-guaranteed loans positions it as a key financier in the power sector. PFC is further strengthening its growth potential through strategic diversification into renewable energy and infrastructure financing.
With a solid track record in resolving stressed assets and transitioning to more stable, state-backed loans, PFC’s asset quality remains strong, which positions it well to capitalize on the rising demand for energy-related infrastructure.
The stock is trading at a price to book value (P/BV) ratio of 1.5x, below the industry P/BV of 2.3x.
#2 Tata Motors
Next on our list is Tata Motors.
Tata Motors, a US$ 34 billion (bn) company of the Tata Group, stands out as a deep value stock with robust fundamentals and strategic global positioning.
The company has a broad portfolio, offering passenger, utility, and commercial vehicles across over 100 countries. It also boasts a strong luxury car presence through its Jaguar Land Rover (JLR) subsidiary, reinforcing its global stature.
The company has increasingly focused on the electric vehicle (EV) segment, where it has a leading market share in India. Tata Motors plans to expand its EV business significantly, aiming to double EV penetration in India and launch ten new EVs by 2026.
As part of this shift, it has rebranded its EV division to TATA.ev, with major developments underway, such as the expansion of its Sanand plant to include a lithium-ion battery production facility.
This move reflects Tata Motors’ strategy to dominate the EV market, not only in India but globally.
Tata Motors Financial Snapshot (2020-2024)
| 2019-2020 | 2020-2021 | 2021-2022 | 2022-2023 | 2023-2024 | |
| Revenue Growth (%) | -13.55% | -3.47% | 10.69% | 23.98% | 26.57% |
| Operating Profit Margin (%) | 8.03% | 13.98% | 9.97% | 10.57% | 14.95% |
| Net Profit Margin (%) | -4.20% | -5.21% | -4.03% | 0.78% | 7.26% |
| Return on Capital Employed(%) | -1.92% | -1.27% | 1.23% | 7.67% | 21.41% |
| Return on Equity (%) | -17.94% | -22.17% | -22.53% | 5.99% | 48.90% |
Source: Equitymaster
Between 2020 and 2024, the business has shown steady growth, particularly after 2021. Sales have consistently increased, and the company has turned a profit in FY23 and FY24, marking a significant turnaround after four years of consecutive losses.
This has helped boost the RoCE and RoE, which stand at 21.4% and 48.9%, respectively in FY24.
Despite global challenges such as semiconductor shortages, rising costs, geopolitical uncertainties, and weak demand in key markets, Tata Motors remains resilient.
Its India business continues to thrive with record sales in passenger vehicles, boosted by infrastructure spending and festive demand. Infrastructure spending and festive consumption have further boosted demand.
Meanwhile, Jaguar Land Rover (JLR) is navigating short-term pressures from weak demand and rising costs, but the brand remains confident in its recovery, with a focus on high-margin models like the Range Rover and an upcoming ramp-up of its EV production.
With the expansion of its EV capabilities and strong market positioning, Tata Motors is poised for long-term growth, making it an attractive deep-value stock for investors.
The stock is trading at a price to earnings (P/E) ratio of 8.6, well below the industry PE of 19.4.
#3 Bank of Baroda
Third on our list is Bank of Baroda.
Bank of Baroda has made significant strides in recent years, with its advances growing over 50% over the last five years.
Alongside this, the bank has enhanced its asset quality, reducing its net NPAs by one-third. This reflects a focus on prudent lending and risk management.
Over time, the bank has leveraged its corporate relationships to expand its loan book, while also building a strong international presence. Today, 10% of the bank’s total deposits are sourced from its international operations, highlighting its growing global footprint.
This solid performance has driven a sharp increase in RoE, which has quadrupled over the past few years. Also, its capital adequacy ratio (CAR) has improved and is above the regulatory requirement.
Bank of Baroda Financial Snapshot (2020-2024)
| 2019-2020 | 2020-2021 | 2021-2022 | 2022-2023 | 2023-2024 | |
| Net Profit Growth (%) | -13.33% | 54.31% | 429.63% | 90.75% | 25.34% |
| Advances Growth (%) | 45.91% | 2.36% | 10.24% | 20.87% | 13.01% |
| Deposits Growth (%) | 46.22% | 2.33% | 8.02% | 14.77% | 9.49% |
| Return on Equity(%) | 1.63% | 1.91% | 8.84% | 14.92% | 16.38% |
Source: Equitymaster
However, the bank’s stock has risen only 6-7% in 2024, reflecting some challenges despite its improving fundamentals.
Intense competition in deposit mobilisation has kept growth in this area in line with the broader system, while also increasing funding costs.
Slow growth in current and savings accounts (CASA) and higher deposit rates have put pressure on the net interest margin (NIM) which is expected to remain stable or face a slight contraction.
While Bank of Baroda has faced some short-term challenges, such as moderating advances growth and pressures on earnings, the bank’s solid operational foundation and its efforts to reduce reliance on bulk deposits put it in a strong position for the long term.
The focus on improving efficiency and managing costs aligns with a strategy that enhances resilience in a changing financial landscape.
Additionally, the bank’s ability to adapt to evolving market conditions, while navigating near-term pressures, highlights its capability to manage and sustain growth.
The combination of these factors, alongside its solid fundamentals, suggests that the bank is positioned for good long-term growth.
The stock is trading at a P/BV ratio of 1.1x, close a to its industry P/BV of 0.95x.
#4 Coal India
Fourth on our list is Coal India.
Coal India, the world’s largest coal producer, is commanding in India’s coal sector, supplying 80% of the country’s coal. Its operations are anchored by open-cast mines, which account for 90% of its production, spread across seven wholly-owned subsidiaries.
Primarily catering to the power sector under Fuel Supply Agreements (FSAs), Coal India meets the bulk of the coal demand through these agreements, with any surplus sold through e-auctions at market-determined prices.
While these e-auction prices are significantly higher than those set under FSAs, they make up a smaller portion of the overall sales, with just 10-12% of the production.
However, the company’s stock has only risen by 10% in 2024, reflecting the challenges faced in the first half of FY25. A 2% dip in revenue, a 7% decline in adjusted EBITDA, and reduced profit margins have weighed on its performance.
These setbacks stem from operational disruptions caused by heavy monsoons, weaker e-auction volumes, and a 5% fall in fixed-price contract realisations.
Coal India Financial Snapshot (2020-2024)
| 2019-2020 | 2020-2021 | 2021-2022 | 2022-2023 | 2023-2024 | |
| Revenue Growth (%) | -2.94% | -8.28% | 20.82% | 30.67% | 5.47% |
| Operating Profit Margin (%) | 19.73% | 16.63% | 17.62% | 25.57% | 27.04% |
| Net Profit Margin (%) | 11.75% | 9.44% | 10.71% | 15.97% | 18.06% |
| Return on Capital Employed(%) | 73.08% | 46.06% | 54.38% | 78.91% | 64.47% |
| Return on Equity (%) | 56.99% | 36.99% | 43.63% | 61.01% | 52.06% |
Source: Equitymaster
From 2020 to 2024, the company achieved a strong sales and net profit CAGR of 8% and 16%, respectively. Over the past five years, it has consistently delivered impressive returns, with an average RoE of 63.7% and RoCE of 50.8%.
Looking ahead, the company is strategically investing in coking coal washeries and diversifying into renewables and coal gasification, which could fuel future growth.
While its near-term performance depends on an operational recovery and the successful execution of key strategic projects, Coal India’s strong market position and expansion initiatives point to a solid growth path once these challenges are overcome.
The stock is trading at a P/E ratio of 7.1x, a deep discount to its industry PE of 20.4x.
#5 ONGC
Last on our list we have Oil and Natural Gas Corporation (ONGC).
ONGC is India’s largest producer of crude oil and natural gas, accounting for around 70% of the country’s domestic production.
Its wholly-owned subsidiary, ONGC Videsh, is the largest Indian multinational in the energy space, with operations in 36 oil and gas properties across 17 countries.
The company maintains a balanced portfolio of mature and new oil fields to ensure continuous growth, while also proactively implementing well interventions and advancing new well-drilling activities.
Between 2020 and 2024, ONGC has performed consistently, with sales and net profit growing at a 5-year CAGR of 6.9% and 11%, respectively.
The company’s RoCE and RoE have been stable, averaging 14.2% and 13.4%, respectively, supported by higher crude oil prices and growing production.
ONGC Financial Snapshot (2020-2024)
| 2019-2020 | 2020-2021 | 2021-2022 | 2022-2023 | 2023-2024 | |
| Revenue Growth (%) | -6.11% | -22.43% | 57.56% | 28.44% | -5.42% |
| Operating Profit Margin (%) | 14.45% | 16.52% | 16.58% | 12.65% | 18.04% |
| Net Profit Margin (%) | 2.68% | 5.89% | 9.22% | 4.95% | 8.83% |
| Return on Capital Employed(%) | 8.37% | 10.98% | 17.27% | 13.96% | 20.41% |
| Return on Equity (%) | 5.43% | 10.03% | 20.52% | 12.56% | 18.42% |
Source: Equitymaster
Recently, the company posted a solid performance in H1FY25, driven by lower-than-expected survey-dry wells expenses and levies, along with higher other income.
Looking ahead ONGC’s future looks bright. The oil giant is pursuing several initiatives to increase production capacity, including the Daman Upside and DSF II projects.
These investments, along with its ongoing infusion into OPaL and capex plans, highlight the company’s focus on expanding and improving its operations.
ONGC’s diversification across crude, gas, and exploration provides stability, but its true upside lies in its ongoing projects like the KG-98/2 oil and gas field, which is ramping up production.
With peak output expected by FY25-end or early FY26, the project could significantly boost the company’s earnings in the medium term.
Additionally, the shift from APM gas to New Well Gas (NWG) should drive long-term volume growth, further strengthening the company’s fundamentals.
The stock is trading at a P/E ratio of 7.6x, well below its industry PE of 23.4x.
Conclusion
Identifying these opportunities requires careful evaluation of financial metrics, growth prospects, and sectoral tailwinds.
As 2024 ends, and the market stabilizes, this is an opportune time to reassess portfolios and position for the structural growth stories that could define the years ahead.
Investors who stay disciplined and focus on value-driven fundamentals are likely to emerge stronger, regardless of short-term market movements.
—
Originally Posted November 30, 2024 – 5 Deep Value Stocks to Watch Out in 2025
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…
This article is syndicated from Equitymaster.com
Join The Conversation
If you have a general question, it may already be covered in our FAQs. If you have an account-specific question or concern, please reach out to Client Services.
Leave a Reply
Disclosure: Equitymaster
Copyright © 2022 Equitymaster Agora Research Private Limited (Research Analyst) bearing SEBI Registration No. INH000000537. Equitymaster is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one’s own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an ‘As Is’ basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.
Disclosure: Interactive Brokers
Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.
This material is from Equitymaster and is being posted with its permission. The views expressed in this material are solely those of the author and/or Equitymaster and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
Send me some more stock pics please. I’m so interesred