Article

5 Multi-bagger stocks for the next 5-years

07 Apr 2020 Nikita Bhoota

The Indian benchmark indices Nifty 50 and Sensex have plummeted 27.8% and 28% respectively from February 28, 2020 to April 03, 2020.  Rise in coronavirus cases in the country as well as at the global level and inability to find a vaccine to treat the epidemic has created panic all over the world.

As per the media reports, India has crossed the mark of 4,400 Covid19 cases. To curb the situation, the Government has announced a 21days lockdown due to which the economic activity and income of the people in the country are adversely affected. However, the Government has announced Rs.1.7lakh cr relief package to support the stressed pockets in the economy.

The investors are liquidating their market investments and ready to book losses in the fear that the market will fall further. However, investors from a long term point of view should act opposite, instead of selling their investments, they should accumulate the stocks with strong fundamentals and with attractive valuations.

Therefore, based on the positive outlook, future growth prospects, and management pedigree of the companies, we have selected the below 5 stocks that could be likely multi-baggers over the period of next 5-years. 

Quess Corp

We are positive on the stock on account of strong financial position, presence of strong promoter group and attractive valuations. The company has not seen any downsizing of temporary headcount by the clients due to spread of Covid 19. Not a single FTE (full-time equivalent) has so far been de-mobilised by clients. In general staffing, clients are retaining headcount in preparation for recovery, while IT staffing is benefitting from ramp-up at captives. The housekeeping business is steady. In staffing as well as FM, tri-partite agreements imply that Quess has on obligation to retain FTEs in the event of down-sizing by clients. However, the early closure of colleges will impact F&B revenues in the short run. We consider the recent correction in the stock to accumulate the stock for the long run. The stock is currently trading at 8.4x FY21EPS.

Year

Net Sales (Rs Cr)

OPM (%)

PAT (Rs Cr)

EPS (Rs)

PE (x)

FY19

8,527

5.4%

256

17.3

12.7

FY20E

11,015

6.2%

115

7.8

28.2

FY21E

12,867

6.4%

388

26.2

8.4

Source: 5paisa Research

Tata Consumer Products

We are positive on the stock on account market share gains and new launches. Market share gains in India tea are mainly from regional and local players. The company commands 20% market share in tea segment in India.   Moreover, it will also benefit owing to the shift from unorganized to organized sales on the back of premiumisation, strong marketing campaigns (Jaago Re) and higher sales of new variants (Elaichi, Masala, Agni). The increasing trend of Specialty, herbal teas in international market (US, UK, Canada) will also drive future growth. Thus, we expect revenue CAGR of 6.8% over FY19-21E. We expect EBITDA CAGR of 18.5% over FY19-21E due to to favorable commodity prices and improvement in margin of coffee business. We expect PAT CAGR of 15.9% over FY19-21E. The stock is currently trading at 30.7x FY21EPS.

Year

Revenue (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY19

7,251

10.8

408

6.5

41.3

FY20E

7,521

12.6

463

7.3

36.4

FY21E

8,269

13.3

548

8.7

30.7

Source: 5paisa Research

Exide Industries

Exide Industries, a duopoly player, stands to benefit from auto replacement demand recovery, emerging opportunities (solar and e-rickshaws), cost control & minimal capex, and softer lead prices. However, the company will face short term challenges due to the temporary shutdown of manufacturing units and slowdown in the economy due to spread of Covid19. Thus, we see revenue CAGR of 5% over FY19-21E. We expect margins to improve by 120 bps in the same period on lower lead prices and better after market OEM revenue mix. We forecast 9% PAT CAGR over FY19-21E driven by healthy top-line growth (stable replacement demand + recovery in OEM volumes). The stock is currently trading at 10.8x FY21EPS.

Year

Net Sales (Rs Cr)

OPM (%)

PAT (Rs Cr)

EPS (Rs)

PE (x)

FY19

10,588

13.3

844

8.7

14.7

FY20E

10,427

14.0

884

10.4

12.3

FY21E

11,592

14.5

1,008

11.9

10.8

Source: 5paisa Research

SBI Life Insurance (SBI Life)

SBI Life is India’s largest private life insurer, with an overall market share of 12.2% on a retail APE basis. The company has a product mix of participating, non-participating and linked policies, with the mix skewed towards linked products. Unlike peers, for which growth is largely driven by one or two product segments, SBI Life has delivered industry leading growth across protection, non-par annuity and guaranteed return products as well as ULIPs, defying the weak sentiment in the capital markets. We believe that it could continue to surprise the street positively via resilient growth in uncertain times driven by a strong distribution franchise and mass customer base. We expect 17.3%/25% EV/VNB CAGR over FY19-21E. The stock trades at 2x FY21E P/EV.

Year

New Premuim Income (Rs Cr)

VNB (Rs Cr)

VNB margin (%)

PAT (Rs Cr)

EV per share

P/EV (x)

FY19E

32,890

1,720

17.7%

1,326

224

2.7

FY20E

43,076

2,169

19.0%

1,659

262

2.3

FY21E

52,550

2,695

20.0%

2,102

308

2.0

Source: 5paisa Research

Deepak Nitrite (DNL)

We expect strong topline growth of 29.2% CAGR over FY19-21E driven by growth in the Basic Chemicals and the Fine & Specialty segments. Downstream derivatives of phenol and acetone should start contributing to growth from FY21E. The company continues to invest in R&D, and efforts are underway to launch new fine & specialty chemicals that are agrochemical and pharma intermediates. Further, Management expects DNL to benefit from the unfortunate outbreak of the novel coronavirus, which will likely accelerate the search for non-China suppliers. EBITDA margins are expected to improve 450 bps over FY19-21E due to continuous strength in basic chemicals, Fine and Specialty chemical segment and products business. We see PAT CAGR of 70.2% over FY19-21E. The stock is trades at 10.3x FY21E EPS.

Year

Net Sales (Rs Cr)

OPM (%)

PAT(Rs Cr)

EPS(Rs)

PE(x)

FY19

2,699

15.3

173

12.7

29.9

FY20E

4,270

23.0

560

41.1

9.2

FY21E

4,505

19.8

501

36.7

10.3

Source: 5paisa Research

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5 Multi-bagger stocks for the next 5-years

07 Apr 2020 Nikita Bhoota

The Indian benchmark indices Nifty 50 and Sensex have plummeted 27.8% and 28% respectively from February 28, 2020 to April 03, 2020.  Rise in coronavirus cases in the country as well as at the global level and inability to find a vaccine to treat the epidemic has created panic all over the world.

As per the media reports, India has crossed the mark of 4,400 Covid19 cases. To curb the situation, the Government has announced a 21days lockdown due to which the economic activity and income of the people in the country are adversely affected. However, the Government has announced Rs.1.7lakh cr relief package to support the stressed pockets in the economy.

The investors are liquidating their market investments and ready to book losses in the fear that the market will fall further. However, investors from a long term point of view should act opposite, instead of selling their investments, they should accumulate the stocks with strong fundamentals and with attractive valuations.

Therefore, based on the positive outlook, future growth prospects, and management pedigree of the companies, we have selected the below 5 stocks that could be likely multi-baggers over the period of next 5-years. 

Quess Corp

We are positive on the stock on account of strong financial position, presence of strong promoter group and attractive valuations. The company has not seen any downsizing of temporary headcount by the clients due to spread of Covid 19. Not a single FTE (full-time equivalent) has so far been de-mobilised by clients. In general staffing, clients are retaining headcount in preparation for recovery, while IT staffing is benefitting from ramp-up at captives. The housekeeping business is steady. In staffing as well as FM, tri-partite agreements imply that Quess has on obligation to retain FTEs in the event of down-sizing by clients. However, the early closure of colleges will impact F&B revenues in the short run. We consider the recent correction in the stock to accumulate the stock for the long run. The stock is currently trading at 8.4x FY21EPS.

Year

Net Sales (Rs Cr)

OPM (%)

PAT (Rs Cr)

EPS (Rs)

PE (x)

FY19

8,527

5.4%

256

17.3

12.7

FY20E

11,015

6.2%

115

7.8

28.2

FY21E

12,867

6.4%

388

26.2

8.4

Source: 5paisa Research

Tata Consumer Products

We are positive on the stock on account market share gains and new launches. Market share gains in India tea are mainly from regional and local players. The company commands 20% market share in tea segment in India.   Moreover, it will also benefit owing to the shift from unorganized to organized sales on the back of premiumisation, strong marketing campaigns (Jaago Re) and higher sales of new variants (Elaichi, Masala, Agni). The increasing trend of Specialty, herbal teas in international market (US, UK, Canada) will also drive future growth. Thus, we expect revenue CAGR of 6.8% over FY19-21E. We expect EBITDA CAGR of 18.5% over FY19-21E due to to favorable commodity prices and improvement in margin of coffee business. We expect PAT CAGR of 15.9% over FY19-21E. The stock is currently trading at 30.7x FY21EPS.

Year

Revenue (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY19

7,251

10.8

408

6.5

41.3

FY20E

7,521

12.6

463

7.3

36.4

FY21E

8,269

13.3

548

8.7

30.7

Source: 5paisa Research

Exide Industries

Exide Industries, a duopoly player, stands to benefit from auto replacement demand recovery, emerging opportunities (solar and e-rickshaws), cost control & minimal capex, and softer lead prices. However, the company will face short term challenges due to the temporary shutdown of manufacturing units and slowdown in the economy due to spread of Covid19. Thus, we see revenue CAGR of 5% over FY19-21E. We expect margins to improve by 120 bps in the same period on lower lead prices and better after market OEM revenue mix. We forecast 9% PAT CAGR over FY19-21E driven by healthy top-line growth (stable replacement demand + recovery in OEM volumes). The stock is currently trading at 10.8x FY21EPS.

Year

Net Sales (Rs Cr)

OPM (%)

PAT (Rs Cr)

EPS (Rs)

PE (x)

FY19

10,588

13.3

844

8.7

14.7

FY20E

10,427

14.0

884

10.4

12.3

FY21E

11,592

14.5

1,008

11.9

10.8

Source: 5paisa Research

SBI Life Insurance (SBI Life)

SBI Life is India’s largest private life insurer, with an overall market share of 12.2% on a retail APE basis. The company has a product mix of participating, non-participating and linked policies, with the mix skewed towards linked products. Unlike peers, for which growth is largely driven by one or two product segments, SBI Life has delivered industry leading growth across protection, non-par annuity and guaranteed return products as well as ULIPs, defying the weak sentiment in the capital markets. We believe that it could continue to surprise the street positively via resilient growth in uncertain times driven by a strong distribution franchise and mass customer base. We expect 17.3%/25% EV/VNB CAGR over FY19-21E. The stock trades at 2x FY21E P/EV.

Year

New Premuim Income (Rs Cr)

VNB (Rs Cr)

VNB margin (%)

PAT (Rs Cr)

EV per share

P/EV (x)

FY19E

32,890

1,720

17.7%

1,326

224

2.7

FY20E

43,076

2,169

19.0%

1,659

262

2.3

FY21E

52,550

2,695

20.0%

2,102

308

2.0

Source: 5paisa Research

Deepak Nitrite (DNL)

We expect strong topline growth of 29.2% CAGR over FY19-21E driven by growth in the Basic Chemicals and the Fine & Specialty segments. Downstream derivatives of phenol and acetone should start contributing to growth from FY21E. The company continues to invest in R&D, and efforts are underway to launch new fine & specialty chemicals that are agrochemical and pharma intermediates. Further, Management expects DNL to benefit from the unfortunate outbreak of the novel coronavirus, which will likely accelerate the search for non-China suppliers. EBITDA margins are expected to improve 450 bps over FY19-21E due to continuous strength in basic chemicals, Fine and Specialty chemical segment and products business. We see PAT CAGR of 70.2% over FY19-21E. The stock is trades at 10.3x FY21E EPS.

Year

Net Sales (Rs Cr)

OPM (%)

PAT(Rs Cr)

EPS(Rs)

PE(x)

FY19

2,699

15.3

173

12.7

29.9

FY20E

4,270

23.0

560

41.1

9.2

FY21E

4,505

19.8

501

36.7

10.3

Source: 5paisa Research