1:10, 1:2 Splits: Nestle, VBL, 4 Popular Stocks That Split In FY24 Gives Up To 275% Returns; BUY More?

The financial year FY24 is soon to conclude. This fiscal was packed with record-high market levels with periodic volatility, as Indian stocks climbed to step into the top 5 global markets. Due to peak levels and extraordinary returns, a list of companies split their shares to improve liquidity, increase demand and attract new investors. In FY24 so far, six popular stocks have given double-digit to multi-bagging returns and there is more room for buying in them.

These six stocks are Nestle, Varun Beverages, Hindustan Aeronautics, Cochin Shipyards, Surya Roshni, and JB Chemicals.

During stock splits the number of shares of a listed companies rise, while its face value drops however, its share capital remains same.

1. Nestle:

FMCG giant, Nestle turned ex-split on January 5, 2024, for its stock split ratio of 1:10. Its face value was reduced from Rs 10 to Rs 1. Nestle stock has risen by over 31% so far in FY24, compared to its price level of Rs 1,969 on March 31, 2023.

Currently, the stock is at Rs 2,587.90 apiece, while its 52-week high and low are at Rs 2,770.75 and Rs 1,884.20 apiece respectively.

In its research note, BOB Capitals Market said, "NEST continues to deliver a strong performance in domestic markets amid a challenging environment, supported by consumer engagement, new launches and an increasing reach in rural markets. We expect sustained, profitable growth underpinned by continued investments in innovation, premiumisation and direct reach expansion with a rural focus."

Accordingly, the brokerage continues to hold a target price of Rs 2,826 with a BUY rating.

2. Cochin Shipyard:

This defence stock has emerged as a multi-bagger with gains of nearly 275.5% so far in FY24. The stock was around Rs 237 levels at the end of March 2023-fiscal. Currently, Cochin is trading at Rs 893.30 apiece, while its 52-week high and low are around Rs 944.65 and Rs 205.50 respectively.

Cochin also turned ex-split in January 2024 for a ratio of 1:2. Its face value was trimmed to Rs 5 from earlier Rs 10.

BP Wealth at the latest recommended buying in Cochin share price for a target of Rs 919. The brokerage's investment rationale is due to Cochin's strong outstanding order book of Rs 21,500 crore so far. Further, its outstanding repair order book of Rs 800 crore, out of which, the majority of them are with the Defence Ministry and they are expected to be executed in FY25.

Accordingly, moving forward, the company has various orders in the pipeline which will keep the top-line growth intact and maintain margins for the future period, thereby ensuring long-term sustained growth, BP's note said.

3. Hindustan Aeronautics (HAL):

Top defence company, Hindustan Aeronautics (HAL) turned ex-split in September 2023 for its ratio of 1:2. Accordingly, the face value of Rs 10 was trimmed to Rs 5 each.

HAL is a banger stock and has risen by more than 141.7% in FY24 so far. The defence heavyweight was around Rs 1,365 levels as of March 31, 2023. Currently, on March 27, 2024, the stock price stood at Rs 3,300.50 apiece and was closing the gap to its 52-week high levels of Rs 3,428.75 apiece.

In its latest research note, UBS said, "After three years of flattish growth, we think HAL is set to triple its order book from Rs0.8tn in FY23 to Rs2.4tn in FY26E. We believe HAL is on course to re-rate by a similar magnitude to BHE in the past decade if it gets its execution right. Initiate Buy with a PT of Rs3,600.00, based on a 32x PE, in line with BHE's current 12m fwd PE."

Also, ICICI Direct has set a target price of Rs 3,660 on HAL.

4. JB Chemicals & Pharmaceuticals:

This pharma company turned ex-split in September 2023 for a ratio of 1:2. Since its face value halved from Rs 2 to Rs 1 each, investors' number of shares in JB doubled.

JB has seen significant growth in FY24 with its share price soaring by nearly 64% in the fiscal year. The stock was around 985.45 rupees level by the end of FY23.

Currently, JB's shares are at Rs 1,613 apiece on BSE and are closing the gap towards its 52-week high of Rs 1,935 apiece, while trading well above its 52-week low of Rs 914.65 apiece.

The latest to recommend buy in JB is Nirmal Bang. The brokerage in its report said, "We estimate healthy FCF generation of ~Rs7.8bn over FY25EFY26E with minimal capex requirement for organic growth. ROE/ROCE is expected to remain healthy at 24.1%/22.4% by FY25E. We maintain BUY on JB Chem with a revised TP of Rs2,062, valuing it at 23x Dec'25E EV/EBITDA. JB Chem remains our preferred pick in the Pharma space, mainly underpinned by aggressive growth focus in the domestic market, high return ratios and healthy FCF generation."

5. Varun Beverages:

FMCG stock, Varun Beverages turned ex-split in June 2023, for its ratio of 1:2. The face value halved from Rs 10 to Rs 5, while the number of shares doubled in investors' portfolios. So far in FY24, Varun Beverages' shares have doubled with gains of over 102% from their Rs 693.63 level at the end of March 2023.

Currently, Varun Beverages' stock is around Rs 1401.60 apiece, while its 52-week high and low are of Rs 1,560.30 and Rs 665.23 apiece respectively.

On the valuation, Motilal Oswal recently said, "We expect VBL to maintain its earnings momentum, aided by: 1) higher acceptance of newly launched products, 2) increased penetration in newly acquired territories in India and Africa, 3) continued expansion in capacity and distribution reach, 4) growing refrigeration in rural and semi-rural areas, and 5) a scale-up in international operations."

Further, the brokerage's note added, "Factoring the strong fundamentals and potential for future growth (expect 21%/22%/28% revenue/EBITDA/PAT CAGR over CY23-26), we retain our BUY rating for the stock. We value the stock at 57x Mar'26E EPS to arrive at a TP of Rs 1,600."

6. Surya Roshni:

Despite correcting from its 52-week high of Rs 841.50 apiece significantly, iron & steel products maker, Surya Roshni is still up by 54.6% so far in FY24, from its level that was by the end of FY23. The stock was near Rs 328.8 levels on March 31, 2023. Currently, the stock is around Rs 508.25 apiece on BSE.

Surya Roshni turned ex-split in October 2023 for a ratio of 1:2. The face value halved to Rs 5 each from earlier Rs 10 each, while the number of shares doubled in the investor's portfolio.

In its latest report for Surya Roshni, IDBI Capital has recommended HOLD, however, its target price hints at over 45% potential upside. The brokerage's note added, "The company aims to increase the intensity of capex in FY25 and is planning a greenfield expansion. We lower our FY24 EBITDA estimate by 14% given weaker than expected Q3FY24 EBITDA but broadly maintain our FY25 forecasts. We introduce FY26 estimates in this report. Our revised SOTP-based target price stands at Rs738 (earlier Rs530); maintain HOLD rating."

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author or Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.