Article

5 Top Stocks That Can Be 5X in 5 Years

07 Aug 2019 Nikita Bhoota

Indian stock market is hitting new highs in recent times and is expected to continue its rally backed by strong economic reforms like GST, demonetization and stable political environment in the country. Additionally, India has emerged as a strong growing economy which may continue to attract a lot of foreign direct Investment. It is difficult to find multi-bagger stocks which will give you huge returns in already run-up markets. A multi-bagger stock is the one which multiplies the invested money in a period of 3-5 years. However, if an Investor selects a stock for investment based on strong revenue visibility, unique product portfolio and decent management, it could deliver substantial returns in the years to come. Based on the fundamentals of the company, we believe below mentioned stocks could be potential multi-baggers in the coming years.

Ujjivan Financial Services

Ujjivan Financial Services (Ujjivan) is a NBFC-MFI focused on serving the underpenetrated economically active poor segment. Its FY17 gross loan book stands at Rs.6,379 cr. We are upbeat on growth outlook for Ujjivan Financial Services (UFSL) as a SFB (small finance bank). The growth in business and lowering cost of funds will aid margin expansion. Ujjivan is adequately capitalized for next two years. We expect 26% CAGR loan growth over FY17-19E. Incrementally, the focus will be on secured segments like housing and MSME, which are expected to grow from 3% of the loan book currently to one-third of the loan book by FY20E. UFSL has received the scheduled bank status approval which will allow it to raise deposits from big institutions. We expect improvement in net interest margin by 140 bps over FY17-19E as cost of funds are anticipated to go down by 230 bps over the similar period.

Years NII (Rs Cr) Pre - Provision Profit (Rs Cr) EPS (Rs) P/BV (x) ROE (%)
FY18E 7,471 2,818 1.5 2.8 1.0
FY19E 9,520 3,954 16.4 2.6 10.7

Source: 5paisa Research

Interglobe Aviation

 InterGlobe Aviation (IndiGo) is India’s largest passenger airlines with market share of ~38% as of August 2017. InterGlobe is transforming strategically, and its moves include  shifting from pure sale and leaseback models to buying aircrafts, targeting shorter term leases while the Neo engine issues are resolved and increasing focus on regional routes (inducting ATRs Vs single aircraft type). These are expected to aid market share gains for IndiGo. The company has sufficient cash on the books ~Rs.8,000 Cr (post QIP @ Rs 1,130 per share) which should enable it to fund its fleet acquisitions.

Years Revenue (Rs Cr) EBITDA (%) EPS (Rs) P/E P/BV (x) ROE %
FY18E 22,947 13.9 59.1 19.7 8.6 50.6
FY19E 28,490 14 76.7 15.2 6.6 52.4

Source: 5paisa Research

ICICI Prudential Life insurance Ltd

ICICI Prudential Life Insurance is an insurer with a market share of 12% on retail weighted premium received (RWRP) basis. IPru Life is well positioned to capture growth opportunities arising from the buoyant equity markets, given its predominant positioning as seller of unit-linked products (ULIPs) and aided by robust distribution architecture and cost competitiveness. We forecast IPru Life to deliver ~26% CAGR in value of new business (VNB) over FY17-19E driven by 14% CAGR in NBP (new business premium) and 390 bps increase in VNB margins. Embedded Value (EV) likely grow at ~11% CAGR over FY17-19E. Return on Embedded Value (ROEV) should remain robust at 14-16.5% over the medium term. A strong market and capital position, rapidly improving profitability metrics and potential upside to earnings from stronger franchise growth should place IPru Life favorably among competitors.

Rs (cr) Net premium income(Rs Cr) VNB EPS (Rs) P/EV(x) RoE (%) RoEV (%)
FY18E 26,400 12 11.7 2.15 24.3 14
FY19E 31200 13 13.5 1.9 24.1 14.8

Source: 5paisa Research

CG Power & Industrial Solutions Ltd

CG Power and Industrial Solutions is engaged in power transformers and reactors, low tension motors and switchgears business. Divestment of ailing units (Ziv, US Power, Hungary business) would help international subsidiaries to breakeven in FY18E and turn positive in FY19E that should boost consolidated recurring EPS CAGR to 35% over FY17-20E. Power Systems EBIT margins have recovered in FY17 led by cost efficiency initiatives and turnaround in distribution transformers. With likely closure of the loss-making projects (Power Solutions) in FY18E, Power Systems EBITDA margins are expected to be 10% plus. CG saw a significant traction in the railways segment during FY17 and targets to consistently increase market penetration supported with new product offerings. Product portfolio expansion, new BEE norms for motors, and increasing presence in railways would drive high growth in Industrial Systems. We forecast 15% earnings CAGR over FY17-20E vs 3% in FY15-17 for this segment.

Revenue (Rs Cr) EBITDA % EPS (Rs) PE (X) ROE (%) ROCE (%)
FY18E 6,123 8.1 3.4 24.1 5.2 8.2
FY19E 6,880 9.3 5.5 14.9 8.2 10.5

Source: 5paisa Research

Central Depository Services Ltd (CDSL)

CDSL is the leading securities depository in India with a market share of 43%. It offers dematerialization (DEMAT) services to Depository Participants (DPs) and other capital market intermediaries. It derived 35% of revenue from annual issue charges, transaction charges (21%), IPO and corporate action charges (12%), document storage charges (12%) and remaining 20% from other services in FY17. We estimate revenue CAGR of 14% over FY17-FY19E as under-penetration in stock market (2-3%) provides significant opportunity for CDSL to improve its market share. Further, it operates in duopoly market and its business has entry barriers in terms of regulatory restrictions, capitalization norms and long gestation period. The rising volume in capital markets and CDSL’s agreement with various education institutions to dematerialize the academic certificates of students will also improve the top line. We expect EBITDA CAGR of 16% over FY17-FY19E due to operating leverage as its fixed cost largely remains same because it mainly includes expenses on software development and employees. We expect PAT CAGR of 18% over FY17-FY19E.

Revenue (Rs cr) EBITDA (%) EPS(Rs) PE(x) P/BV(x)
FY17 146 54.1% 8.2 43.2 6.9
FY18E 228 55.0% 9.7 36.5 6.0
FY19E 364 56.0% 11.4 31.1 5.2

Source: 5paisa Research

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5 Top Stocks That Can Be 5X in 5 Years

07 Aug 2019 Nikita Bhoota

Indian stock market is hitting new highs in recent times and is expected to continue its rally backed by strong economic reforms like GST, demonetization and stable political environment in the country. Additionally, India has emerged as a strong growing economy which may continue to attract a lot of foreign direct Investment. It is difficult to find multi-bagger stocks which will give you huge returns in already run-up markets. A multi-bagger stock is the one which multiplies the invested money in a period of 3-5 years. However, if an Investor selects a stock for investment based on strong revenue visibility, unique product portfolio and decent management, it could deliver substantial returns in the years to come. Based on the fundamentals of the company, we believe below mentioned stocks could be potential multi-baggers in the coming years.

Ujjivan Financial Services

Ujjivan Financial Services (Ujjivan) is a NBFC-MFI focused on serving the underpenetrated economically active poor segment. Its FY17 gross loan book stands at Rs.6,379 cr. We are upbeat on growth outlook for Ujjivan Financial Services (UFSL) as a SFB (small finance bank). The growth in business and lowering cost of funds will aid margin expansion. Ujjivan is adequately capitalized for next two years. We expect 26% CAGR loan growth over FY17-19E. Incrementally, the focus will be on secured segments like housing and MSME, which are expected to grow from 3% of the loan book currently to one-third of the loan book by FY20E. UFSL has received the scheduled bank status approval which will allow it to raise deposits from big institutions. We expect improvement in net interest margin by 140 bps over FY17-19E as cost of funds are anticipated to go down by 230 bps over the similar period.

Years NII (Rs Cr) Pre - Provision Profit (Rs Cr) EPS (Rs) P/BV (x) ROE (%)
FY18E 7,471 2,818 1.5 2.8 1.0
FY19E 9,520 3,954 16.4 2.6 10.7

Source: 5paisa Research

Interglobe Aviation

 InterGlobe Aviation (IndiGo) is India’s largest passenger airlines with market share of ~38% as of August 2017. InterGlobe is transforming strategically, and its moves include  shifting from pure sale and leaseback models to buying aircrafts, targeting shorter term leases while the Neo engine issues are resolved and increasing focus on regional routes (inducting ATRs Vs single aircraft type). These are expected to aid market share gains for IndiGo. The company has sufficient cash on the books ~Rs.8,000 Cr (post QIP @ Rs 1,130 per share) which should enable it to fund its fleet acquisitions.

Years Revenue (Rs Cr) EBITDA (%) EPS (Rs) P/E P/BV (x) ROE %
FY18E 22,947 13.9 59.1 19.7 8.6 50.6
FY19E 28,490 14 76.7 15.2 6.6 52.4

Source: 5paisa Research

ICICI Prudential Life insurance Ltd

ICICI Prudential Life Insurance is an insurer with a market share of 12% on retail weighted premium received (RWRP) basis. IPru Life is well positioned to capture growth opportunities arising from the buoyant equity markets, given its predominant positioning as seller of unit-linked products (ULIPs) and aided by robust distribution architecture and cost competitiveness. We forecast IPru Life to deliver ~26% CAGR in value of new business (VNB) over FY17-19E driven by 14% CAGR in NBP (new business premium) and 390 bps increase in VNB margins. Embedded Value (EV) likely grow at ~11% CAGR over FY17-19E. Return on Embedded Value (ROEV) should remain robust at 14-16.5% over the medium term. A strong market and capital position, rapidly improving profitability metrics and potential upside to earnings from stronger franchise growth should place IPru Life favorably among competitors.

Rs (cr) Net premium income(Rs Cr) VNB EPS (Rs) P/EV(x) RoE (%) RoEV (%)
FY18E 26,400 12 11.7 2.15 24.3 14
FY19E 31200 13 13.5 1.9 24.1 14.8

Source: 5paisa Research

CG Power & Industrial Solutions Ltd

CG Power and Industrial Solutions is engaged in power transformers and reactors, low tension motors and switchgears business. Divestment of ailing units (Ziv, US Power, Hungary business) would help international subsidiaries to breakeven in FY18E and turn positive in FY19E that should boost consolidated recurring EPS CAGR to 35% over FY17-20E. Power Systems EBIT margins have recovered in FY17 led by cost efficiency initiatives and turnaround in distribution transformers. With likely closure of the loss-making projects (Power Solutions) in FY18E, Power Systems EBITDA margins are expected to be 10% plus. CG saw a significant traction in the railways segment during FY17 and targets to consistently increase market penetration supported with new product offerings. Product portfolio expansion, new BEE norms for motors, and increasing presence in railways would drive high growth in Industrial Systems. We forecast 15% earnings CAGR over FY17-20E vs 3% in FY15-17 for this segment.

Revenue (Rs Cr) EBITDA % EPS (Rs) PE (X) ROE (%) ROCE (%)
FY18E 6,123 8.1 3.4 24.1 5.2 8.2
FY19E 6,880 9.3 5.5 14.9 8.2 10.5

Source: 5paisa Research

Central Depository Services Ltd (CDSL)

CDSL is the leading securities depository in India with a market share of 43%. It offers dematerialization (DEMAT) services to Depository Participants (DPs) and other capital market intermediaries. It derived 35% of revenue from annual issue charges, transaction charges (21%), IPO and corporate action charges (12%), document storage charges (12%) and remaining 20% from other services in FY17. We estimate revenue CAGR of 14% over FY17-FY19E as under-penetration in stock market (2-3%) provides significant opportunity for CDSL to improve its market share. Further, it operates in duopoly market and its business has entry barriers in terms of regulatory restrictions, capitalization norms and long gestation period. The rising volume in capital markets and CDSL’s agreement with various education institutions to dematerialize the academic certificates of students will also improve the top line. We expect EBITDA CAGR of 16% over FY17-FY19E due to operating leverage as its fixed cost largely remains same because it mainly includes expenses on software development and employees. We expect PAT CAGR of 18% over FY17-FY19E.

Revenue (Rs cr) EBITDA (%) EPS(Rs) PE(x) P/BV(x)
FY17 146 54.1% 8.2 43.2 6.9
FY18E 228 55.0% 9.7 36.5 6.0
FY19E 364 56.0% 11.4 31.1 5.2

Source: 5paisa Research

Research Disclaimer