Article

5 Multi-Bagger Stocks For The Next 5 Years

Nikita Bhoota

09 May 2018

Untitled Document

The Financial year 2018 was a remarkable year for investors in the Indian markets. Both the benchmark indices Nifty 50 and Sensex touched a closing high of 11,130 (January 29, 2018) and 36,283 (January 29, 2018) levels for the first time respectively. In percentage terms, Nifty and Sensex advanced ~9.5% and ~10.2% respectively during the year.

However, the Indian stock market was in correction phase since the last week of January 2018 due to selling pressure in the market on account of implementation of LTCG from April 1, 2018.

But eventually, market picked up on account of improving domestic macro numbers such as GDP and inflation. Further, easing of trade war between China and US and resolving geopolitical issues in Korea supported the market performance. However, picking up good stocks for investing in such a volatile market is not easy. Therefore, based on the fundamentals, management outlook and product portfolio of the company, we have cherry picked the below mentioned stocks that could be potential multi-baggers in the coming years.

Indian Hotels Company

Indian Hotels Company Limited (IHCL), known as ‘Taj Group’, is one of the Asia’s largest group of hotels. IHCL is a key beneficiary of reviving hotel industry demand, and it aims to become market leader in terms of room inventory, across relevant segments in India. It has strategic initiatives to sell non-core assets in order to reduce total debt of the company. IHCL has an inventory pipeline of ~546 rooms over next 12 months. Overall, we expect standalone revenue CAGR of 9% over FY18-20E. We estimate standalone EBITDA margin expansion of 350bps on account of improving RevPAR and hotel portfolio mix of IHCL. Owing to debt reduction measures, we expect standalone PAT CAGR of 31% over FY18-20E.

Year

Net Sales

(Rs cr)

OPM (%)

Adj PAT (Rs cr)

EPS (Rs)

PE (x)

P/ABV (x)

FY18E

2,490

21.9

195

1.6

89.7

4.1

FY19E

2,705

22.9

250

2.1

69.9

3.8

FY20E

2,948

25.4

336

2.8

52.0

3.6

Source:5 Paisa Research


Ujjivan Financial Services

Ujjivan Financial Services’ (UFSL) would benefit from falling cost of funds due to change in liability profile, improving deposit to advances ratio, declining cost ratios and credit cost. Business volume of microfinance is back to normal post demonetization and it is expected to grow decently over FY19-20E. In addition, rising bank branch network will help in addition of new customers and cross selling opportunities (from existing and new customers) to supplement its loan book growth. We expect loan book to register ~22% CAGR over FY17-20E to Rs11,458cr. Its high cost legacy loans are being replaced by low cost deposits, as a consequence, its cost of funds would reduce over next few years. In addition, its CASA ratio over FY17-FY20E is expected to improve by 799bps to 11%.

Year

NII (Rs cr)

PAT (Rs cr)

P/BV (x)

ROE (%)

FY18E

865

-2

2.9

-0.1

FY19E

1,053

224

2.6

12.0

FY20E

1,342

291

2.2

13.7

Source:5 Paisa Research


Amber Enterprises

Amber Enterprises Ltd. (AEL), a market leader in Indian RAC OEM/ODM industry has strong prospects backed by increasing demand for ACs, increasing operating leverage and debt repayment. AEL stands to gain from growing RAC market given its whopping 55.4% market share. AEL is focused on increasing share of high margin ODM based manufacturing (~currently 72% of sales) by enhancing its product portfolio e.g. IOT based Inverter RACs.  AEL plans to export to Middle East, South & South East Asia as well as Europe. Capacity utilization at ~47% is likely to provide operating leverage. Financial leverage will play out post debt repayment. We expect sales and PAT to grow at ~22.5% and ~58% CAGR respectively (FY18-20E) and EBITDA margin to expand to 9.5% by FY20E (9.1% in FY18E).

Year

Net Sales (Rs cr)

OPM (%)

PAT (Rs cr)

EPS (Rs)

PE (x)

FY18E

1,908

9.1

65

20.7

54.2

FY19E

2,327

9.1

121

38.5

29.1

FY20E

2,862

9.5

163

51.9

21.6

Source:5 Paisa Research


CESC

CESC is a RP-Sanjiv Goenka Group company that is engaged in power generation and distribution. The company has presence in retail, bpo services, infrastructure and other businesses. CESC, a diversified conglomerate, is demerging into four different entities, which would create significant value for shareholders. CESC is likely to see revenue CAGR of 6.3% over FY18-20E aided by PPA opportunities for the power generation business, and Spencer adding new stores. The four new entities would be – CESC Ltd (Distribution), Haldia Energy (Generation), Spencer (Retail) and CESC Ventures. We expect PAT CAGR of 14.9% over FY18-20E respectively with an EBITDA margin of 21.4% in FY20E.

Year

Net Sales (Rs Cr)

OPM (%)

PAT (Rs cr)

EPS (Rs)

PE (x)

FY18E

16,833

22.1

937

70.5

14.8

FY19E

17,913

21.8

1132

85.1

12.3

FY20E

19,014

21.4

1236

92.9

11.3

Source:5 Paisa Research


HCL Technologies

HCL Tech (HCLT), India’s fourth largest IT company would perform well on expected recovery in IMS, higher traction in ER&D segment and investments in IP partnerships. HCLT is better placed among peers with sector leading revenue growth guidance and stable margins. We expect the company to post 10.1% revenue CAGR over FY18-20E owing to recovery in Infrastructure Management Services (IMS), higher rate of Engineering and R&D (ER&D) services outsourcing in India and strategy of investing in IP partnership to complement its internally developed IPs (key part of growth). Margins are expected to improve by 50bps over FY18-20E on better execution and IP revenue contribution. We expect PAT CAGR of 10.5% over same period.

Year

Net Sales (Rs cr)

OPM (%)

PAT (Rs cr)

EPS (Rs)

PE (x)

FY18E

50,758

19.9

8779

63.2

15.8

FY19E

56,815

20.2

9,773

70.3

14.2

FY20E

61,894

20.4

10723

77.1

13.0

Source:5 Paisa Research

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    This article claims RJio was given a "Backdoor Entry" into the 4G Based Voice Routing. The peculiar aspect is without the Voice License, Rjio would have been a mere ISP. With the license, it is now a holistic communications service provider, with ability to exponentially scale the bouquet of products. The events indicate it was meticulously planned way before the auctions because the auctions were clear on the agenda: 4G for internet only.

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mutual-fund

Why to Choose Mutual Funds Instead of Directly Investing Into Equities?

Whether to invest in equities or mutual funds is a question that has plagued every investor. As someone who needs the best value for his/her investment should you invest in equity directly or via mutual funds?

Let’s start by first understanding what these two terms ‘equities’ and ‘mutual funds’ stand for-

Equities- Equities generally represent ownership of a company. If you own any equity in a company, you are a part owner of the said company (depending on how much equity you own).

Mutual Funds – It is an investment scheme which is professionally managed by an asset management company. It pools together the resources of a group of people and invests their money in equities, debentures, bonds and other securities.

Why choose mutual funds over equities?

For people who’ve never invested in either stocks or mutual funds, it is hard to know which is better and where to start. Broadly speaking, if you are a novice investor, mutual funds are not only less risky but also way easier to manage. Here are some ways in which investing in mutual funds is beneficial as opposed to investing in equities -

Diversification

Mutual funds provide more diversification as compared to an individual equity stock. When you invest in equity, you are investing in a single company which has its inherent risk. For example, if you invest Rs.20,000 in buying equities of one company, you could face a total loss if that particular company performs poorly in the market.  

If you invest the same amount in mutual funds, it will be invested in different kinds of stocks and financial instruments, high-risk and low-risk both, so you might not face total loss even if one company does poorly.

Scale of Investment and Lower Costs

For an individual investor buying and selling stocks is a difficult task due to its high price. Thus, any gains made from stock appreciation are nullified if the overall trading costs are considered. Comparatively with mutual funds, as the money is pooled from a large number of investors, the cost per individual is lowered.  

Another advantage of mutual funds is that you don’t need to invest large sums of money. Buying equities for a profitable venture needs huge amounts of money, a minimum of few lakhs. With mutual funds, you can start with Rs.1000 and earn profits on that as well.

Convenience

Keeping an eye on the markets everyday is a time-consuming business, especially if you are investing as a side gig. There are people who spend their lives studying the market and still end up sustaining heavy losses. Though investing in mutual funds does not guarantee high returns, it is stress-free and needs less work as compared to investing in equities.

To sum it up

It is important to remember that mutual funds have their own disadvantages as well. Thus, as with any financial decision, educating yourself and understanding the suitability of all the available options is the ideal way to invest. 

Have Referral Code?

5 Multi-Bagger Stocks For The Next 5 Years

Nikita Bhoota

09 May 2018

Untitled Document

The Financial year 2018 was a remarkable year for investors in the Indian markets. Both the benchmark indices Nifty 50 and Sensex touched a closing high of 11,130 (January 29, 2018) and 36,283 (January 29, 2018) levels for the first time respectively. In percentage terms, Nifty and Sensex advanced ~9.5% and ~10.2% respectively during the year.

However, the Indian stock market was in correction phase since the last week of January 2018 due to selling pressure in the market on account of implementation of LTCG from April 1, 2018.

But eventually, market picked up on account of improving domestic macro numbers such as GDP and inflation. Further, easing of trade war between China and US and resolving geopolitical issues in Korea supported the market performance. However, picking up good stocks for investing in such a volatile market is not easy. Therefore, based on the fundamentals, management outlook and product portfolio of the company, we have cherry picked the below mentioned stocks that could be potential multi-baggers in the coming years.

Indian Hotels Company

Indian Hotels Company Limited (IHCL), known as ‘Taj Group’, is one of the Asia’s largest group of hotels. IHCL is a key beneficiary of reviving hotel industry demand, and it aims to become market leader in terms of room inventory, across relevant segments in India. It has strategic initiatives to sell non-core assets in order to reduce total debt of the company. IHCL has an inventory pipeline of ~546 rooms over next 12 months. Overall, we expect standalone revenue CAGR of 9% over FY18-20E. We estimate standalone EBITDA margin expansion of 350bps on account of improving RevPAR and hotel portfolio mix of IHCL. Owing to debt reduction measures, we expect standalone PAT CAGR of 31% over FY18-20E.

Year

Net Sales

(Rs cr)

OPM (%)

Adj PAT (Rs cr)

EPS (Rs)

PE (x)

P/ABV (x)

FY18E

2,490

21.9

195

1.6

89.7

4.1

FY19E

2,705

22.9

250

2.1

69.9

3.8

FY20E

2,948

25.4

336

2.8

52.0

3.6

Source:5 Paisa Research


Ujjivan Financial Services

Ujjivan Financial Services’ (UFSL) would benefit from falling cost of funds due to change in liability profile, improving deposit to advances ratio, declining cost ratios and credit cost. Business volume of microfinance is back to normal post demonetization and it is expected to grow decently over FY19-20E. In addition, rising bank branch network will help in addition of new customers and cross selling opportunities (from existing and new customers) to supplement its loan book growth. We expect loan book to register ~22% CAGR over FY17-20E to Rs11,458cr. Its high cost legacy loans are being replaced by low cost deposits, as a consequence, its cost of funds would reduce over next few years. In addition, its CASA ratio over FY17-FY20E is expected to improve by 799bps to 11%.

Year

NII (Rs cr)

PAT (Rs cr)

P/BV (x)

ROE (%)

FY18E

865

-2

2.9

-0.1

FY19E

1,053

224

2.6

12.0

FY20E

1,342

291

2.2

13.7

Source:5 Paisa Research


Amber Enterprises

Amber Enterprises Ltd. (AEL), a market leader in Indian RAC OEM/ODM industry has strong prospects backed by increasing demand for ACs, increasing operating leverage and debt repayment. AEL stands to gain from growing RAC market given its whopping 55.4% market share. AEL is focused on increasing share of high margin ODM based manufacturing (~currently 72% of sales) by enhancing its product portfolio e.g. IOT based Inverter RACs.  AEL plans to export to Middle East, South & South East Asia as well as Europe. Capacity utilization at ~47% is likely to provide operating leverage. Financial leverage will play out post debt repayment. We expect sales and PAT to grow at ~22.5% and ~58% CAGR respectively (FY18-20E) and EBITDA margin to expand to 9.5% by FY20E (9.1% in FY18E).

Year

Net Sales (Rs cr)

OPM (%)

PAT (Rs cr)

EPS (Rs)

PE (x)

FY18E

1,908

9.1

65

20.7

54.2

FY19E

2,327

9.1

121

38.5

29.1

FY20E

2,862

9.5

163

51.9

21.6

Source:5 Paisa Research


CESC

CESC is a RP-Sanjiv Goenka Group company that is engaged in power generation and distribution. The company has presence in retail, bpo services, infrastructure and other businesses. CESC, a diversified conglomerate, is demerging into four different entities, which would create significant value for shareholders. CESC is likely to see revenue CAGR of 6.3% over FY18-20E aided by PPA opportunities for the power generation business, and Spencer adding new stores. The four new entities would be – CESC Ltd (Distribution), Haldia Energy (Generation), Spencer (Retail) and CESC Ventures. We expect PAT CAGR of 14.9% over FY18-20E respectively with an EBITDA margin of 21.4% in FY20E.

Year

Net Sales (Rs Cr)

OPM (%)

PAT (Rs cr)

EPS (Rs)

PE (x)

FY18E

16,833

22.1

937

70.5

14.8

FY19E

17,913

21.8

1132

85.1

12.3

FY20E

19,014

21.4

1236

92.9

11.3

Source:5 Paisa Research


HCL Technologies

HCL Tech (HCLT), India’s fourth largest IT company would perform well on expected recovery in IMS, higher traction in ER&D segment and investments in IP partnerships. HCLT is better placed among peers with sector leading revenue growth guidance and stable margins. We expect the company to post 10.1% revenue CAGR over FY18-20E owing to recovery in Infrastructure Management Services (IMS), higher rate of Engineering and R&D (ER&D) services outsourcing in India and strategy of investing in IP partnership to complement its internally developed IPs (key part of growth). Margins are expected to improve by 50bps over FY18-20E on better execution and IP revenue contribution. We expect PAT CAGR of 10.5% over same period.

Year

Net Sales (Rs cr)

OPM (%)

PAT (Rs cr)

EPS (Rs)

PE (x)

FY18E

50,758

19.9

8779

63.2

15.8

FY19E

56,815

20.2

9,773

70.3

14.2

FY20E

61,894

20.4

10723

77.1

13.0

Source:5 Paisa Research