Manufacturing is one of the key industries for job creation in any economy. With the help of the Make India scheme the manufacturing hub has been highlighted and has a global recognition.
Now that the Modi government has been elected for a second, broader term, industrial growth is expected to boost manufacturing stocks over the next few years.
Hence buying stocks in the manufacturing industry in India will be an added bonus .
India is expected to become the 5th largest manufacturing country in the world by the end of the year 2022.
How to chose the best Manufacturing Stocks 2022?
These are some value assessment points that will help you differentiate and find the manufacturing stock more suitable for you :
Market capital
It shows how long a company has been established and its profitability and safety level. Hence a higher market capital is usually safer. Although there are some companies with a smaller capital that do very well for manufacturing stock investors.
P/E ratio
The price to earning ratio tells us if the stock is overvalued or undervalued according to the market. A lower P/E ratio is better for potential investors.
Industry P/E Ratio
This is the average P/E Ratio of a particular sector or industry. The average P/E Ratio of the manufacturing industry is between 20 and 25. Lower industry P/E shows an undervalued stock and higher shows an overvalued stock. A lower industry P/E Ratio than 25 is a good indicator for the best manufacturing stocks in India.
Book value
Book value is the sum of total assets and total liabilities. So the book value is the amount that one will receive if the company is completely dismantled or shut down. If the book value is more than market value then the stock is undervalued. If the book value is less than market value, then the stock is overvalued.
Return on Equity
Also known as ROE is the relationship between a company’s profit and the investor’s return. A return on equity between 15-20 is good for the top manufacturing company stocks.
EPS is the earnings per share of a company. A higher earnings per share shows that the company is more profitable to the investor. Hence it is a green flag if a manufacturing company has a higher EPS.
Dividend Yield
It is the percentage that shows the dividend that you will receive per share. A percentage Dividend Yield between 2% and 4% is considered as a strong yield and is safe. Above 4% is also good but it increases the risk.
P/B Ratio
The price to book value is the share price or dividend by book value per share. A P/B Ratio of less than 3 is good for all kinds of stocks. A good sign for this is lower the better.
Top 10 manufacturing industry stocks
These are the top 10 manufacturing industry stocks according to me:
1. Maruti Suzuki Ltd.
Its stocks have maintained a ‘ buy ‘ rating from the BofA Securities Company. The exceeding demand and newer model is a plus point for the company but also for the investor as it is a vast growing company. It is also one of the sought after manufacturing stock due to its high value in the market.
Value assessment :
- Market Capital – 2.62 Trillion rupees
- Book value – ₹8660.00
- P/E Ratio – 81.04
- Industry P/E Ratio – 16.51
- P/B Ratio – 4.76
- Dividend Yield Percentage – 0.69 %
- ROE – 7.20
- EPS – 147.01
2. Tata Motors Ltd.
It is the best manufacturing stock for short term investment. The present price is ₹440, it usually dips to 430 which is a good time to buy. Its target price is ₹462 for a normal time period but its target price is ₹475 for a short time period.
Value assessment :
- Market Capital – 1.44 trillion rupees
- Book value – ₹404.00
- P/E Ratio – NA
- Industry P/E Ratio -16.51
- P/B Ratio – 3.41
- Dividend Yield Percentage – NA
- ROE – -22.93
- EPS – -31.80
3. Larsen and Toubro Ltd.
The best value for this manufacturing stock is found within the 2-3 time period in SIP mode. Another plus point is that it is a debt free company which makes it a very safe investment for manufacturing stocks in 2022.
Value assessment :
- Market Capital – 2.56 trillion rupees
- Book value – ₹1816.60
- P/E Ratio – 28.07
- Industry P/E Ratio -8.20
- P/B Ratio – 3.13
- Dividend Yield Percentage – 1.20
- ROE – 10.95
- EPS – 65.40
4. Mahindra and Mahindra Ltd.
It has the best plan for a 5 year investment as its revenue is said to increase by around 77.63 %. As it is an old company and has been in the National Stock Exchange for 25 years it is a very trusted company for returns on stocks.
Value assessment :
- Market Capital – 1.50 trillion rupees
- Book value – ₹1258.00
- P/E Ratio – 16.60
- Industry P/E Ratio – 16.51
- P/B Ratio – 2.93
- Dividend Yield Percentage – 0.93
- ROE – 14.83
- EPS – 74.83
5. Britannia Industries
Its 5 year investment revenue is expected to be around+30.6% which is a massive return seeing other manufacturing industries stocks. If you buy this manufacturing stock then the one year return is -21.72%, the three year return is +28.17% and the five year return is +77.91 % as of the 2022 analysis.
Value assessment :
- Market Capital – 932.40 billion rupees
- Book value – ₹3871.00
- P/E Ratio – 63.02
- Industry P/E Ratio – 20.42
- P/B Ratio – 36.28
- Dividend Yield Percentage – 4.22
- ROE – 49.95
- EPS – 61.15
6. Reliance Industries
It is the most affordable manufacturing stock for long term investment. It is also India’s largest company by market capital. This is one of the best choices for long term in the manufacturing stock sector.
Value assessment :
- Market Capital – 15.75 trillion rupees
- Book value – ₹2328.00
- P/E Ratio – 23.61
- Industry P/E Ratio – 6.22
- P/B Ratio – 2.02
- Dividend Yield Percentage – 0.34
- ROE – 8.21
- EPS – 98.80
7. Hindustan Unilever Ltd.
It is the largest fast moving goods industry in the world. The company’s equity dividend is 3400% amounting to ₹34 per share. Due to its global popularity it is one of the best investment for both long and short term in manufacturing sector in India.
Value assessment :
- Market Capital – 6.35 trillion rupees
- Book value – ₹2705.40
- P/E Ratio – 18.35
- Industry P/E Ratio – 62.75
- P/B Ratio – 12.94
- Dividend Yield Percentage – 1.26
- ROE – 18.35
- EPS – 38.98
8. Asian Paints Ltd.
It is the 14th largest paint company globally. Its revenue has grown by 14 % in the last 5 years and it is said that it will keep on increasing in the upcoming years. Hence it is on the list of best manufacturing stocks to buy in 2022.
Value assessment :
- Market Capital – 3.25 trillion rupees
- Book value – ₹3402.00
- P/E Ratio – 98.45
- Industry P/E Ratio – 13.07
- P/B Ratio – 24.80
- Dividend Yield Percentage – 0.54
- ROE – 22.77
- EPS – 36.27
9. ITC Ltd.
We have seen that over the past 5 years it has had a good dividend track. This is one of the best stocks for the manufacturing industry for long term investment.
Value assessment :
- Market Capital – 4.13 trillion rupees
- Book value – ₹334.35
- P/E Ratio – 24.48
- Industry P/E Ratio – NA
- P/B Ratio – 6.41
- Dividend Yield Percentage – 3.54
- ROE – 24.82
- EPS – 13.28
10. Pidilitie Industries
It has a good brand recognition which is one of the main reasons for the people to trust and buy in this manufacturing stock. It has always had good quarterly growth.
Value assessment :
- Market Capital – 1.38 trillion rupees
- Book value – ₹2725.00
- P/E Ratio – 105.02
- Industry P/E Ratio – 13.07
- P/B Ratio – 21.98
- Dividend Yield Percentage – 0.36
- ROE – 20.13
- EPS – 26.37
The Bottom Line
India is an attractive hub for foreign investment in the manufacturing sector and it has potential of reaching 1 trillion dollars by 2025.
The implementation of the Goods and Services Tax (GST) and with the push to develop industrial corridors and smart cities, the government of India aims to help further integrate supervision and develop an environment favourable for industrial development and promoting advanced activities in the field of manufacturing.
Choose your investment in manufacturing stock wisely!
Further Read:
What did we learn?
- 1 How to chose the best Manufacturing Stocks 2022?
- 2 Top 10 manufacturing industry stocks
- 3 The Bottom Line
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