As Indians, we are obsessed with word ‘big’ – a big car, we all want a big house, a big salary package and as investors, we always want big returns.
Bahubali is synonymous to something big and as investors, we want to invest in stocks which can give multibagger returns in quick time.
If you remember, Bahubali II collections crossed the Rs 1,000 crore mark in no time. Forget about the first week or second week, this is by far the most successful movie in Indian history.
Having a portfolio of quality stocks can give returns which can match Bahubali. Investors should possess the patience to invest in the market or a company when there is fear in the market and valuations are just right because that would have a good risk-to-reward ratio.
“Even in the field of investing, the waiting game eventually pays off. Of course, like Bahubali, you need to keep constantly chipping away at your eventual investment goal,” Angel Broking said in a blog.
“Like Bahubali, your investment decisions must be driven by cold logic and incisive analysis. Your decisions may appear to be wrong, but that is not really material,” it said.
Here, in this article, we are also focussing on stocks which have already doubled your money in the last 2-3 years, but can still fetch multibagger returns in the next 2-3 years.
All these stocks possess qualities of strong management, wide product portfolio, interlinked with an economy which is likely to do well in near future etc.
Last week, market touched record highs but we saw some profit booking in small and midcap stocks. The S&P BSE Midcap index closed 124 points lower, while the S&P BSE Smallcap Index ended 140 points down for the week ended May 26.
Last week trading activity suggested that all is not well in the broader market and if there is a correction that investors should be ready with their shopping list.
“Since the last one to two months it was being anticipated that midcaps are bound to correct given steep valuation, increased valuation gap between large & midcaps and the risk of high expectation on earnings growth next year,” Vinod Nair - Head of Research, Geojit Financial Services told Moneycontrol.
“Largecaps will also be under pressure given consolidation in the global market but outperform the midcaps. Short term investors are suggested to book profit while long-term investors should consider this as an opportunity to expand their midcap exposure in the long-term,” he said.
We have collated a list of 10 stocks as suggested by various experts which have already risen more than 100 percent in the last 3 years but can still offer multibagger returns in next 2-3 years
Analyst: Vinod Nair - Head of Research, Geojit Financial Services.
Bharat Forge (BFL) is planning to scale up the new business from current 5 percent to 15 percent in the next 2 to 3 years. The orders from Boeing and new defense JV with AM General will provide higher revenue visibility in the non-auto sector during FY18.
BFL has also entered into JVs with SAAB, Rafael & IAI (Israel Aircraft Industry) which will boost its presence in the field of air defense. Government mandatory for in-house sourcing for ‘Make in India’ projects will benefit Bharat Forge, in the long run, to build up order book.
Upcoming BS6 emission norms can aid a sharp increase in content per vehicle due to increase in the engine components parts in car and Truck segment. “We expect 13 percent revenue CAGR over FY17-19E led by pick-up in US truck market and de-risking the utilization in the non-auto sector,” said Nair.
Ashok Leyland (AL)
Ashok Leyland (AL) is the second largest commercial vehicle (CV) manufacturer in India will be direct beneficiary led by improvement in the road infrastructure projects. AL is the largest supplier of logistic vehicles to Indian Army (5 percent of revenue), will see higher traction from the new defense procurement policy.
AL's 100 percent acquisition on its 3 JV with Nissan Corporation of the LCV business will give positive impetus for the business and also allow using the Nissan technology on a 1 percent royalty basis for 5 years.
The management is focused on gaining market share in LCV from 15 percent to 30 percent over next 2-3 years by launching new models in FY18. “We expect the AL's revenue to grow at 14 percent CAGR over FY17-19E by factoring 12 percent volume growth in our estimate for the same period,” Nair said.
Higher than expected GST rate in consumer discretionary may have some impact on volume due to likely price hike post the GST rolled out. However, being a leading player in electrical consumer goods and the recent acquisition of Lloyd consumer business is expected to bring long-term scalability to HAVL’s consumer business.
“We expect revenue & PAT to grow at healthy 14 percent & 17 percent CAGR over FY17-FY19E. Given strong revenue growth and healthy earnings outlook HAVL is expected to portray a long-term story in the consumer goods segment,” said Nair.
Bharat Electronics (BEL)
BEL has market leadership in defence electronics given its strong execution capabilities, technological tie-ups with a higher focus on R&D.
BEL is a debt free and a cash rich company with a strong order book with of Rs33,806 crore which is 4.7x FY16 sales, providing strong revenue visibility for next 4 years.
Further, BEL will be a major beneficiary of GoI higher focus on Make in India and higher indigenous procurement. GoI plans to bring down import dependence to 30 percent from current 60 percent.
Further, under the new defense procurement policy, a new category called Buy Indian (Indigenously Designed, Developed and Manufactured – IDDM) was introduced, having the highest priority in procurement which will provide higher opportunities for domestic players and improve domestic R&D investments.
Analyst: Dinesh Rohira, Founder & CEO, 5nance.com
The maker of Hair Oil and Edible Oil announced a strong set of the number during the Q4 with volume growth for domestic business at 10 percent higher than industry growth.
As company focus to increase the volume growth through penetrating in the rural market, the higher than expected monsoon is expected to drive the price of stock for long term. The stock has registered 167 percent returns in last three years.
With about USD 30 billion in sales and operation in more than 7 countries, 3M sales wide range products portfolio. As a company prepares to enter defence foray, the order-book is likely to build a huge revenue for the company from mid to long term perspective.
With growth in consumer finance coupled with increase customer base, Bajaj Finance has surged by almost 400 percent in last three years. The net profit during the Q4 grew at 43 percent while containing the surge in NPA at 1.68 percent.
The company is expected to increase the size of the balance sheet by 25 percent in the medium term, the growth trend is expected to an extent for several phases.
A mortgage lender at midcap segment had delivered 3 digit promising returns in last three years. The company reported 24 percent growth in net profit during the Q4 backed by growth in loan and interest income. As government plans for affordable housing, the theme is expected to boost the top-line of the company in the medium term.
Analyst: Amarjeet Maurya in Midcap Research at Angel Broking
We believe that one should look at selective midcaps where there is a strong earning visibility and good financials. Investors should not write off the midcaps but remain cautious and selective at the current valuations.
Midcaps with poor fundamentals and high leverage balance sheet should be avoided. Maurya is positive on KEI Industries, Mirza International, Asian Granito, Navkar Corp, etc. in midcap space.
Despite slower orders due to the UP elections and the impact of the de-monetisation in H2 FY17, KEI’s EPC division did well in FY17. The Chopanki plant expansion disrupted production, hurting sales of EHV cables.
“The re-structuring of vendor financing led to the recognition of buyers’ credit as part of debt, leading to greater transparency. With strong orders across verticals providing revenue assurance for the next two years, the stock is a good buy at current levels,” AnandRathi said in a note.
Mirza International Ltd a leading footwear producing company would be a big beneficiary of a) Shift from unorganized to organized market in India b) Improving economic conditions of the target export market to benefit. The company has diversified revenue source, established a domestic retail presence along with Amalgamation of Genesis Footwear in 2016.
Mirza Intl. has launched a new brand “Bond Street” at a price point slightly below the Redtape brand in the range of Rs 1500-2000 per pair. “The company plans to sell around 3-4 lakh pairs in the domestic market in FY18. The new brand will give deeper penetration to the company in MBOs in tier 2 and 3 cities,” Axis Securities said in a report.
“The new brand is expected to help the company capture its position in the MBOs, where the sales were on exhibiting declining trend,” it said.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol are their own and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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