2 inflation proof stocks trading at lower PE

LT Foods and Indus Towers are great inflation-proof stocks which are also trading at lower PE.

Inflation concerns are running through the global markets. The US Fed reserve has been hiking interest rates for the past few meetings and is expected to continue tightening. Talking about India, RBI is anticipating inflation to stay above 6% (RBI’s upper tolerance level for inflation) for the next 2 quarters of FY23.

The inflationary environment is bad news for the majority of businesses. In the current market scenario, investors should be looking at companies which have strong business, great cash flows, and high dividend yields; available at a cheap valuation.

Betting on LT Foods can be fruitful as it can be inflation-proof stock. Almost 68% of the company’s revenue comes from rice exports in international markets like the US and Europe. LT Foods can easily pass on any input cost pressure if faced by the company to their customers as the company sells strong branded products. If current food inflation influences the rise in rice prices, the company can benefit by selling stored rice at a higher rate. Also, the depreciating rupee against the dollar will be in favour of the company. On June 17 2022, the stock is trading at Rs 71.9 with 7.87x PE.

Due to rapid digitalisation, the internet has become a non-discretionary expense. Telecom can be considered an inflation-proof sector.

Indus towers are the ones in telecom that can benefit as the company is the world's second-largest telecom tower installer. It generates the majority of its revenue from tower rental services. The 3-year operating margin for the company is more than 50%. Bharti Airtel, Reliance Jio, Tata Telecommunication, and Idea-Vodafone are a few of the clients of the company.

However, the investor should know about 31% of promoter pledged shares before investing in the company. Last quarter, Bharti Airtel purchased an additional stake of 4.7% at Rs 187.88 a share of the company. Currently, the stock is trading at Rs 206.55 with an 8.71x PE.