Article

5 Multi-Bagger Stocks For The Next 5 Years

30 Aug 2017 Nikita Bhoota

Indian equity markets have been witnessing huge swings from the second quarter of FY19. The market was trading on a positive note in the months of July and August 2018. Further, Nifty 50 and Sensex touched an all-time high of 11,738 and 38,896 respectively in August 2018. However, from September 03, 2018 the market began its southward journey and plunged ~8% (Nifty) and ~7% (Sensex) till November 20,2018.

Fluctuating oil prices and depreciating rupee were the key reasons for the fall in the markets. Moreover, the liquidity crisis in the NBFC sector and fear of upcoming state & general election results worsened the investors’ confidence. International trade wars and rising interest rates across the globe have also affected the market sentiments.

Selecting good stocks for investing in such an unsteady market is not an easy task. Therefore, based on the fundamentals, management outlook and future growth prospects of the company, we have come up with the below-mentioned stocks that could be potential multi-baggers in the long-run.

IEX

Indian Energy Exchange Ltd (IEX) offers an exchange platform in order to facilitate the physical trading of electricity for power producers and consumers. It enjoys a ~95% market share in the exchange traded segment of the electricity market. In Q2FY19, the company benefited from 17% yoy growth in day-ahead market (DAM) volumes. The volume growth was driven by the SEBs, which accounted for 80% of IEX’s volumes vs. 64% a year ago.  TAM and REC segments also witnessed strong growth of 42% yoy and 311% yoy in Q2FY19. Further, IEX is likely to benefit from 100GW of renewable energy capacity by 2022 and growing interest of Power Discoms in buying through power exchanges. We expect the company to report revenue CAGR of 15.7% over FY18-20E and EBITDA CAGR of 16.7% over FY18-20E. The company is expected to report PAT CAGR of 18.7% over the same period.

Year

Revenues (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY18

256

83.6

132

4.4

35.6

FY19E

296

84.6

169

5.6

27.8

FY20E

343

85.0

186

6.1

25.3

Source:5paisa research

NIIT Tech

NIIT Technologies (NIIT Tech) is a mid-sized IT service provider. BFSI and travel & transport verticals contributed 45% and 27% respectively to Q2FY19 revenue. Geographically, America and EMEA accounted for ~49% and ~34% of revenue respectively, while 17% was contributed by rest of the world (ROW). NIIT Tech is focused on improving its sales growth by constantly improving its deal pipeline (aims for one deal per quarter) and adding new logos. Digital revenues have increased to ~28% in Q2 FY19 of total revenue from ~20% in FY17, driving bulk of the growth. It has made several external hires from global MNCs to maintain its momentum in digital and step up focus in underpenetrated geographies (sales). This should also lead to better client mining and new client acquisitions. Additionally, its focus on improving offerings in sub-segments like property & casualty (insurance) and hospitality (travel) should enable it to expand in US and Europe. Consequently, revenue and PAT is expected to grow at ~22% and ~32% CAGR respectively over FY18-20E.

Year

Net Sales (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY18

2,991

16.8

280

45.5

24.4

FY19E

3,708

17.5

415

67.5

16.4

FY20E

4,414

17.2

484

78.7

14.1

Source: 5Paisa Research

Zee Entertainment

The channel portfolio for Zee Entertainment (Zee) includes 37 domestic channels and 39 international channels. Zee enjoys a strong overseas franchise (172 countries) and more than one billion subscribers worldwide. For FY18, company was the No.1 non-sports entertainment television network with an all-India viewership share of 18%. Zee Entertainment is expected to report revenue and PAT CAGR of 17.2% and 21.4% respectively over FY18-20E owing to market share gains in regional markets (especially Tamil and Kannada) and robust outlook for ZEE5's revenue. Company is expected to benefit from promoters' decision to sell up to 50% of their stake to strategic partner for establishing Zee as Global Tech-Media company. This move aims to accelerate efforts in order to stay ahead of fast changing trends as new technological developments will impact virtually all businesses across sectors (like Telecom, Media, Technology, etc.). Company is currently debt free at net-debt level.

Year

Net Sales (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY18

6,686

31.0%

1,343

14.0

32.1

FY19E

7,868

31.4%

1,738

18.1

24.8

FY20E

9,190

32.1%

1,980

20.6

21.8

Source: 5Paisa Research

Biocon

Biocon is a fully-integrated biopharma player and has API manufacturing facilities, strong capabilities in biologics, innovative drug development and a branded generics business in India. In India, it is the largest biologics company and has products like INSUGEN, BASALOG, CANMAb, etc. Biocon’s early entry in the biosimilars business is a long term positive for the company. Biocon-Mylan has recently received an approval for Trastuzumab and Pegfilgrastim in US and we expect approvals for 3-4 more biosimilars in 2018/2019 across US and EU. This will aid Biocon to grow its bottom-line over next five years. The extension of Bristol-Myers Squibb contract and agreement with GSK is a positive for its research business. We estimate 29.4% and 114% CAGR in revenue and PAT over FY18-20E respectively.

Year

Net Sales (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY18

4,129

20.1

372

6.2

98.9

FY19E

4,865

28.2

706

11.8

52.1

FY20E

6,904

41.8

1707

28.5

21.5

Source: 5Paisa Research

KEC International

KEC has presence in power transmission and distribution (62% of Q2FY19 sales), cables (11%), railways (17%), civil (4%) and solar (5%). KEC has a healthy order book of ~Rs20,140cr (~1.9xTTM sales) as of Q2FY19.  In the T&D space, company is focusing on international markets given slowdown in PGCIL orders. KEC is witnessing good traction in Oman, Abu Dhabi and Egypt. Railways share in order book has increased to 25% in Q2FY19. The company aims to achieve Rs1,500-1,600cr sales in railways segment in FY19 vs. Rs844cr in FY18. Improving performance of its USA subsidiary - SAE Towers, will also aid growth. In addition, pick-up in solar and civil businesses would lead to sales and PAT CAGR of 15.3% and 17.3% (FY18-20E) respectively. Increasing operational efficiencies and rising contribution of high margin railways and civil businesses would lead to EBITDA margin expansion by 28bps to 10.38% by FY20E. However, RBI restriction on rollover of facilities/buyers credit leading to decline in acceptances/trade payables remains the key concern.

Year

Net Sales (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY18

10,058

10.1

458

17.8

15.5

FY19E

11,560

10.2

523

20.3

13.6

FY20E

13,380

10.4

630

24.5

11.3

Source: 5Paisa Research

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5 Multi-Bagger Stocks For The Next 5 Years

30 Aug 2017 Nikita Bhoota

Indian equity markets have been witnessing huge swings from the second quarter of FY19. The market was trading on a positive note in the months of July and August 2018. Further, Nifty 50 and Sensex touched an all-time high of 11,738 and 38,896 respectively in August 2018. However, from September 03, 2018 the market began its southward journey and plunged ~8% (Nifty) and ~7% (Sensex) till November 20,2018.

Fluctuating oil prices and depreciating rupee were the key reasons for the fall in the markets. Moreover, the liquidity crisis in the NBFC sector and fear of upcoming state & general election results worsened the investors’ confidence. International trade wars and rising interest rates across the globe have also affected the market sentiments.

Selecting good stocks for investing in such an unsteady market is not an easy task. Therefore, based on the fundamentals, management outlook and future growth prospects of the company, we have come up with the below-mentioned stocks that could be potential multi-baggers in the long-run.

IEX

Indian Energy Exchange Ltd (IEX) offers an exchange platform in order to facilitate the physical trading of electricity for power producers and consumers. It enjoys a ~95% market share in the exchange traded segment of the electricity market. In Q2FY19, the company benefited from 17% yoy growth in day-ahead market (DAM) volumes. The volume growth was driven by the SEBs, which accounted for 80% of IEX’s volumes vs. 64% a year ago.  TAM and REC segments also witnessed strong growth of 42% yoy and 311% yoy in Q2FY19. Further, IEX is likely to benefit from 100GW of renewable energy capacity by 2022 and growing interest of Power Discoms in buying through power exchanges. We expect the company to report revenue CAGR of 15.7% over FY18-20E and EBITDA CAGR of 16.7% over FY18-20E. The company is expected to report PAT CAGR of 18.7% over the same period.

Year

Revenues (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY18

256

83.6

132

4.4

35.6

FY19E

296

84.6

169

5.6

27.8

FY20E

343

85.0

186

6.1

25.3

Source:5paisa research

NIIT Tech

NIIT Technologies (NIIT Tech) is a mid-sized IT service provider. BFSI and travel & transport verticals contributed 45% and 27% respectively to Q2FY19 revenue. Geographically, America and EMEA accounted for ~49% and ~34% of revenue respectively, while 17% was contributed by rest of the world (ROW). NIIT Tech is focused on improving its sales growth by constantly improving its deal pipeline (aims for one deal per quarter) and adding new logos. Digital revenues have increased to ~28% in Q2 FY19 of total revenue from ~20% in FY17, driving bulk of the growth. It has made several external hires from global MNCs to maintain its momentum in digital and step up focus in underpenetrated geographies (sales). This should also lead to better client mining and new client acquisitions. Additionally, its focus on improving offerings in sub-segments like property & casualty (insurance) and hospitality (travel) should enable it to expand in US and Europe. Consequently, revenue and PAT is expected to grow at ~22% and ~32% CAGR respectively over FY18-20E.

Year

Net Sales (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY18

2,991

16.8

280

45.5

24.4

FY19E

3,708

17.5

415

67.5

16.4

FY20E

4,414

17.2

484

78.7

14.1

Source: 5Paisa Research

Zee Entertainment

The channel portfolio for Zee Entertainment (Zee) includes 37 domestic channels and 39 international channels. Zee enjoys a strong overseas franchise (172 countries) and more than one billion subscribers worldwide. For FY18, company was the No.1 non-sports entertainment television network with an all-India viewership share of 18%. Zee Entertainment is expected to report revenue and PAT CAGR of 17.2% and 21.4% respectively over FY18-20E owing to market share gains in regional markets (especially Tamil and Kannada) and robust outlook for ZEE5's revenue. Company is expected to benefit from promoters' decision to sell up to 50% of their stake to strategic partner for establishing Zee as Global Tech-Media company. This move aims to accelerate efforts in order to stay ahead of fast changing trends as new technological developments will impact virtually all businesses across sectors (like Telecom, Media, Technology, etc.). Company is currently debt free at net-debt level.

Year

Net Sales (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY18

6,686

31.0%

1,343

14.0

32.1

FY19E

7,868

31.4%

1,738

18.1

24.8

FY20E

9,190

32.1%

1,980

20.6

21.8

Source: 5Paisa Research

Biocon

Biocon is a fully-integrated biopharma player and has API manufacturing facilities, strong capabilities in biologics, innovative drug development and a branded generics business in India. In India, it is the largest biologics company and has products like INSUGEN, BASALOG, CANMAb, etc. Biocon’s early entry in the biosimilars business is a long term positive for the company. Biocon-Mylan has recently received an approval for Trastuzumab and Pegfilgrastim in US and we expect approvals for 3-4 more biosimilars in 2018/2019 across US and EU. This will aid Biocon to grow its bottom-line over next five years. The extension of Bristol-Myers Squibb contract and agreement with GSK is a positive for its research business. We estimate 29.4% and 114% CAGR in revenue and PAT over FY18-20E respectively.

Year

Net Sales (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY18

4,129

20.1

372

6.2

98.9

FY19E

4,865

28.2

706

11.8

52.1

FY20E

6,904

41.8

1707

28.5

21.5

Source: 5Paisa Research

KEC International

KEC has presence in power transmission and distribution (62% of Q2FY19 sales), cables (11%), railways (17%), civil (4%) and solar (5%). KEC has a healthy order book of ~Rs20,140cr (~1.9xTTM sales) as of Q2FY19.  In the T&D space, company is focusing on international markets given slowdown in PGCIL orders. KEC is witnessing good traction in Oman, Abu Dhabi and Egypt. Railways share in order book has increased to 25% in Q2FY19. The company aims to achieve Rs1,500-1,600cr sales in railways segment in FY19 vs. Rs844cr in FY18. Improving performance of its USA subsidiary - SAE Towers, will also aid growth. In addition, pick-up in solar and civil businesses would lead to sales and PAT CAGR of 15.3% and 17.3% (FY18-20E) respectively. Increasing operational efficiencies and rising contribution of high margin railways and civil businesses would lead to EBITDA margin expansion by 28bps to 10.38% by FY20E. However, RBI restriction on rollover of facilities/buyers credit leading to decline in acceptances/trade payables remains the key concern.

Year

Net Sales (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY18

10,058

10.1

458

17.8

15.5

FY19E

11,560

10.2

523

20.3

13.6

FY20E

13,380

10.4

630

24.5

11.3

Source: 5Paisa Research