Of myths and midcaps: Four tortoise stocks that won the race in 2024

bull market

The hare and the tortoise story is only too familiar to everyone. Wonder how does it manifest in stock markets? Well, you have the tortoise stocks that are consistent. They're not fast, but keep inching ahead steadily. The hare stocks make big leaps and worn out soon. At the end of the story, the tortoise wins the race.

In the midcap rally of FY24, which sent the BSE Midcap index simmering with 63 percent up, 23 stocks out of the 111 on the index, turned out to be multi-baggers that at least doubled in value. But only four stocks were the triumphant tortoise: Trent, Aurobindo Pharma, Lupin and Solar Industries. These stocks showed steady trades, low volatility or what is called ‘beta’ in high finance, compared with the market barometer Sensex, and yet at the end of the year, landed themselves in leading positions.

Stocks with a beta higher than 1 are seen as more volatile than the index. Their rise is higher than that of the Sensex when it moves up and their fall is also deeper than the index when it falls. A stock with a beta value of less than 1 usually means that it will rise less than the benchmark on the way up, but also fall less on the way down.

Consistent performers

The trajectory through the fiscal for all four stocks show remarkable consistency with three of them showing a steady climb all through the year without any significant drawdown. Only Solar Industries had a 5 percent decline.

Also read: Higher returns with lower volatility: Select indices beat NSE Nifty 50 in past one year

Over the past three years, all these three stocks showed a steady growth in the bottomline: 47 percent CAGR for Trent, 42 percent for Lupin and 41 percent for Solar Industries. Aurobindo Pharma, however, has shown a drop in net profit growth in this period.

At a net profit of Rs 623.8 crore for the December quarter, Aurobindo Pharma recorded an uptick of 109 percent over the previous corresponding quarter. Its operating profit margins improved from 13.79 percent to 17.89 percent in the past 5 quarters. In spite of the steady price gains, Axis Direct has a 'buy' rating on the stock, given its stronger-than-expected earnings and future expansion plans.

Motilal Oswal has a 'buy' tag on Trent on strong revenue productivity, aggressive store additions, margin tailwinds from moderating RM, and operating leverage. Net profits for Trent jumped 113 percent to Rs 343.6 crore in the December quarter of FY24 from Rs 161 crore a year back, while revenue increased 51 percent to Rs 3,389 crore from Rs 2,244 crore and operating profit margins improved  to 18.81 percent from 15.45 percent.

Lupin’s net profit zoomed to Rs 916 crore in the December quarter from Rs 40.4 crore a year ago. IKts operating profit margins expanded to 29.58 percent from 7.52 percent and revenue jumped to Rs 4,138 crore from Rs 2,878 crore in the past 5 quarters. SBI securities is bullish on the stock, given its leadership in certain geographies, strong product portfolio and pipeline and strong quarterly results.

Solar Industries saw its operating profit margins expand to 21.27 percent from 14.69 percent between the last two December quarters with the net profits jumping to Rs 138.3 crore from Rs 115.6 crore. Hem Securities has a 'buy' call on the stock as it believes the company is expected to perform well on the back of strong growth in exports and in overseas operations, steady demand from mining and infra sector and healthy execution in defence segment. Better performance from overseas subsidiaries on the back of strong demand, revenue increase from non-CIL customers in coal segment is expected even as defence and export segments are seen picking up due to diversified portfolio.

On technical charts, all these four midcaps are indicating bullish signals.

Darpan Patil of Rupic consultancy feels technical chart of Trent looks good and the shares are getting ready for the next leg of rally. According to Darpan, after a massive rally Trent is going sideways, also creating a flag chart formation.

Bullish chart @ Trent

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