Article

5 Multi-Bagger Stocks For The Next 5 Years

13 Dec 2019 Nikita Bhoota

The Indian benchmark indices Nifty 50 and Sensex have rallied since October 2019. The indices surged 4.4% and 5.1% respectively from October 01, 2019 till December 10, 2019. Rise in global liquidity (easing monetary policy), improvement in China-US trade negotiations and de-escalation of geopolitical risks acted positive for the markets. On the domestic front, in-line earnings season on account of corporate tax cuts was an added advantage.

Indian equity markets are expected to gain further due to sustained global liquidity and reforms by the Government to boost the economy. 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 five years. 

Quess Corp

Quess Corp is one of India’s leading integrated providers of business services. Quess’ service and product offerings are currently grouped under five operating segments i.e. People and Services, Technology, Facility Management, Industrials and Internet. We expect revenue CAGR of 21.1% over FY19-21E on account of strong outlook in staffing business, consistent client additions and entrance into new service platforms. The company enjoys huge advantage of scale in general staffing in India (largest in India with 240,000 associates & ~41% of group sales). Further, the blend of recently acquired Allsec and Conneqt will make Quess a challenging play in BPM platforms. We expect margins to improve by 110bps over the same period on account of presence in specialized staffing and focus on ramping up high growth sector viz. Facility Management. Expansion of Allsec in newer geographies will also support the margin growth.  We project PAT CAGR of 23.7% over FY19-21E. The stock is currently trading at 17.3x FY21EPS.

Year

Revenue (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY19

8,527

5.4

256

17.5

26.5

FY20E

10,706

6.4

287

19.7

23.6

FY21E

12,495

6.5

392

26.8

17.3

Source: 5paisa research

Tata Global

Tata Global Beverages (TGBL) is the second largest branded tea player in the world, with market leadership in India and Canada, and holds second position in the UK market. The company commands 20% market share in tea segment in India. TGBL expects to continue growing above industry growth rate supported by new launches. 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 6.6% over FY19-21E. Further, TGBL has recently acquired Dhunseri Tea & Industries for Rs101cr to increase share in branded tea business. Notably, Starbucks store count was at 163 stores in Q2FY20. Company’s Vietnam plant is now operational, with first orders shipped in Q1FY20. We expect EBITDA CAGR of 20.5% over FY19-21E as company invests behind brands and targets volume market share. We expect PAT CAGR of 23.3% over FY19-21E. Merger process with Tata Chemicals consumer business is likely to be completed by FY20-end. The stock is currently trading at 31.8x FY21EPS.

Year

Revenue (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY19

7,251

10.8

408

6.5

48.3

FY20E

7,547

13.1

523

8.3

37.6

FY21E

8,236

13.8

620

9.8

31.8

Source: 5 Paisa 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. Further, trigger in terms of unlocking the value of insurance business provides additional margin of safety. According to us, there is very limited probability of the stock going down from here, as it is trading at extremely attractive valuations. We expect margins to improve on lower lead prices and better after market OEM revenue mix. We forecast 17% EPS CAGR over FY19-21E driven by healthy top-line growth (stable replacement demand + recovery in OEM volumes). The stock is currently trading at 15.0x FY21EPS.

Year

Revenues (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY19

10,588

13.3

844

8.7

20.6

FY20E

10,673

13.8

865

10.2

17.6

FY21E

11,950

14.3

1,012

11.9

15.0

Source: 5 Paisa Research

Deepak Nitrite

Deepak Nitrite (DNL) is one of India's leading chemical companies. DNL manufactures almost a hundred products across three major categories i.e. bulk & commodity chemicals, fine & specialty chemicals, and optical brightener agents. The company is on the track to witness surge in earnings during FY20E. The company’s newly-commissioned phenol capacities are operating at more than 85% utilization levels. Moreover, the non-phenol business is likely to report a strong year on the back of higher DASDA price and growth in the specialty chemicals portfolio. Thus, we expect DNL to report revenue and PAT CAGR of 30% and 65% over FY19-22E, respectively. The stock is currently trading at 9.7x FY21EPS.

Year

Revenues (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY19

2,699

12.0

173

12.7

26.6

FY20E

4,277

14.9

519

38.0

8.9

FY21E

4,547

16.4

475

34.8

9.7

Source: 5 Paisa Research

KEC International

KEC International (KEC) has presence in power transmission & distribution, cables, railways, civil and solar projects in 63 countries across Africa, Americas, Central Asia, Middle East, South Asia and South East Asia. The Power T&D segment is the largest segment, which accounts for 80% of the revenue. We are positive on the stock on account of strong order book and outlook on T&D, railways, and civil projects. The order book of Rs19,016cr provides strong revenue visibility. The Green Energy Corridor and projects from State Electricity Boards provide healthy visibility of order inflows for KEC along with visibility in international orders. In railways, the order momentum is expected to pick up as tenders are being floated led by a domestic electrification drive. Thus, we expect revenue CAGR of 16.8% over FY19-21E. We see EBITDA CAGR of 16.7% over FY19-21E on account of better revenue mix (high-margin T&D orders). We expect PAT CAGR of 24.5% over FY19-21E. The stock is currently trading at 9.4x FY21EPS

Year

Revenues (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY19

11,000

10.4

486

18.9

14.5

FY20E

12,993

10.3

631

24.5

11.2

FY21E

15,002

10.4

753

29.3

9.4

Source: 5 Paisa Research

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5 Multi-Bagger Stocks For The Next 5 Years

13 Dec 2019 Nikita Bhoota

The Indian benchmark indices Nifty 50 and Sensex have rallied since October 2019. The indices surged 4.4% and 5.1% respectively from October 01, 2019 till December 10, 2019. Rise in global liquidity (easing monetary policy), improvement in China-US trade negotiations and de-escalation of geopolitical risks acted positive for the markets. On the domestic front, in-line earnings season on account of corporate tax cuts was an added advantage.

Indian equity markets are expected to gain further due to sustained global liquidity and reforms by the Government to boost the economy. 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 five years. 

Quess Corp

Quess Corp is one of India’s leading integrated providers of business services. Quess’ service and product offerings are currently grouped under five operating segments i.e. People and Services, Technology, Facility Management, Industrials and Internet. We expect revenue CAGR of 21.1% over FY19-21E on account of strong outlook in staffing business, consistent client additions and entrance into new service platforms. The company enjoys huge advantage of scale in general staffing in India (largest in India with 240,000 associates & ~41% of group sales). Further, the blend of recently acquired Allsec and Conneqt will make Quess a challenging play in BPM platforms. We expect margins to improve by 110bps over the same period on account of presence in specialized staffing and focus on ramping up high growth sector viz. Facility Management. Expansion of Allsec in newer geographies will also support the margin growth.  We project PAT CAGR of 23.7% over FY19-21E. The stock is currently trading at 17.3x FY21EPS.

Year

Revenue (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY19

8,527

5.4

256

17.5

26.5

FY20E

10,706

6.4

287

19.7

23.6

FY21E

12,495

6.5

392

26.8

17.3

Source: 5paisa research

Tata Global

Tata Global Beverages (TGBL) is the second largest branded tea player in the world, with market leadership in India and Canada, and holds second position in the UK market. The company commands 20% market share in tea segment in India. TGBL expects to continue growing above industry growth rate supported by new launches. 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 6.6% over FY19-21E. Further, TGBL has recently acquired Dhunseri Tea & Industries for Rs101cr to increase share in branded tea business. Notably, Starbucks store count was at 163 stores in Q2FY20. Company’s Vietnam plant is now operational, with first orders shipped in Q1FY20. We expect EBITDA CAGR of 20.5% over FY19-21E as company invests behind brands and targets volume market share. We expect PAT CAGR of 23.3% over FY19-21E. Merger process with Tata Chemicals consumer business is likely to be completed by FY20-end. The stock is currently trading at 31.8x FY21EPS.

Year

Revenue (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY19

7,251

10.8

408

6.5

48.3

FY20E

7,547

13.1

523

8.3

37.6

FY21E

8,236

13.8

620

9.8

31.8

Source: 5 Paisa 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. Further, trigger in terms of unlocking the value of insurance business provides additional margin of safety. According to us, there is very limited probability of the stock going down from here, as it is trading at extremely attractive valuations. We expect margins to improve on lower lead prices and better after market OEM revenue mix. We forecast 17% EPS CAGR over FY19-21E driven by healthy top-line growth (stable replacement demand + recovery in OEM volumes). The stock is currently trading at 15.0x FY21EPS.

Year

Revenues (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY19

10,588

13.3

844

8.7

20.6

FY20E

10,673

13.8

865

10.2

17.6

FY21E

11,950

14.3

1,012

11.9

15.0

Source: 5 Paisa Research

Deepak Nitrite

Deepak Nitrite (DNL) is one of India's leading chemical companies. DNL manufactures almost a hundred products across three major categories i.e. bulk & commodity chemicals, fine & specialty chemicals, and optical brightener agents. The company is on the track to witness surge in earnings during FY20E. The company’s newly-commissioned phenol capacities are operating at more than 85% utilization levels. Moreover, the non-phenol business is likely to report a strong year on the back of higher DASDA price and growth in the specialty chemicals portfolio. Thus, we expect DNL to report revenue and PAT CAGR of 30% and 65% over FY19-22E, respectively. The stock is currently trading at 9.7x FY21EPS.

Year

Revenues (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY19

2,699

12.0

173

12.7

26.6

FY20E

4,277

14.9

519

38.0

8.9

FY21E

4,547

16.4

475

34.8

9.7

Source: 5 Paisa Research

KEC International

KEC International (KEC) has presence in power transmission & distribution, cables, railways, civil and solar projects in 63 countries across Africa, Americas, Central Asia, Middle East, South Asia and South East Asia. The Power T&D segment is the largest segment, which accounts for 80% of the revenue. We are positive on the stock on account of strong order book and outlook on T&D, railways, and civil projects. The order book of Rs19,016cr provides strong revenue visibility. The Green Energy Corridor and projects from State Electricity Boards provide healthy visibility of order inflows for KEC along with visibility in international orders. In railways, the order momentum is expected to pick up as tenders are being floated led by a domestic electrification drive. Thus, we expect revenue CAGR of 16.8% over FY19-21E. We see EBITDA CAGR of 16.7% over FY19-21E on account of better revenue mix (high-margin T&D orders). We expect PAT CAGR of 24.5% over FY19-21E. The stock is currently trading at 9.4x FY21EPS

Year

Revenues (Rs cr)

OPM (%)

Net Profit (Rs cr)

EPS (Rs)

PE (x)

FY19

11,000

10.4

486

18.9

14.5

FY20E

12,993

10.3

631

24.5

11.2

FY21E

15,002

10.4

753

29.3

9.4

Source: 5 Paisa Research