Kshitij Anand of ET has interviewed leading experts like Alok Ranjan of Way2Wealth Brokers, Vinod Nair of Geojit BNP Paribas and Omkar Tanksale of GEPL Capital and analyzed their multibagger stock picks for 2017 and beyond.
(1) Cosmo Films:
Cosmo Films has focused on improving profitability through various cost-saving measures as well as increasing the share of value added films to its topline. Over the years, Cosmo Films has gained market share across its product portfolio and emerged as a leader.
Cosmo Films aspires to become a preferred global brand offering value-added BOPP films and undertaken capacity expansion. The new line is expected to ramp up during the course of FY18.
The new line will have a better asset turnover on account of its width being larger by 20 per cent compared to the industry’s existing maximum standard. “As a leader in this space we believe Cosmo Films is well-poised to take up the growing opportunities in the packaging sector,” said Ranjan.
(2) Greenply Industries:
Greenply Industries is well poised to play out a leading trend change in the interior infrastructure space over the next few years. For the next 2 years, the company is in capex mode.
It is setting up a large facility for MDF production in AP with an investment of Rs 700-730 crore. This will enable the company to treble its MDF capacity and further engrain its leadership position in this segment.
It is planning to increase its outsourcing of economy segment plywood from 22 per cent to 30 per cent over the next 3 years. This will enable the company to free up its in-house capacity for premium plywood production.
The Food Security Agreement (FSA) with Coal India in March 2016 for the Chandrapur project (supply of coal from SECL has started in Apr-16) and the recently signed PPA with UPERC to supply 187MW power to Noida Power Company Ltd (NPCL) augur well for the future.
These factors coupled with the profitability ramp-up at Haldia will enable the company to grow faster. Valuations are reasonable and we expect steady improvement in the financials of the company over next 2-3 years.
(4) NCL Industries:
NCL’s strong brand franchise, premium positioning in north coastal AP and low-cost capacity expansion (0.7 MT at Rs1,800 mn ) will enable the company to grow above industry average and post healthy EBITDA/tn in the next few years.
Also, NCL will be a key beneficiary of the upcoming demand revival in the south and a sharp rise in cement prices. Currently, NCL is trading at an attractive valuation US$33.24/tn on 2.7 MT capacity. However, improvement in EBITDA/ton from here will remain a key trigger going forward.
(5) Bharat Electronics:
The pace of decision making in Indian defence procurement has improved over the past several months and the same is also visible from BEL’s order inflows of Rs17,094 crore in FY16, which is up by 227 per cent (YoY) and the order backlog was up by 45 per cent (YoY).
The current order book to sales is 4.5x at (FY16 sales). The management expects the order inflows of Rs10,000-12,000cr for FY17E and few other potential bigger ticket orders make BEL an attractive investment opportunity.
(6) Bharat Forge:
Bharat Forge is exploring opportunities in aerospace and defence segments and the orders from Boeing and new defence JV with AM General will provide higher revenue visibility in the non-auto sector during FY18.
A drop in commodity prices and cost rationalisation will bring improvement in margins (from current 18.6% to 19.2% in FY18E) and expect 37 per cent earnings growth in FY18E.
(7) Ajanta Pharma:
Ajanta pharma has grown more than two times in last five years . The company has a robust business structure which helped the company to grow with the higher momentum.
Operating margin has increase from 22 per cent in FY12 to 36 per cent in FY16 which shown a great improvement in business efficiency. “We believe that investing in Ajanta pharma will be proved as a safer bet.
(8) Exide Industries:
Exide Industries is one of the India’s largest storage battery manufacturing company. It has a presence over six decades across the geographical territories of India. The company is also in the business of making automotive acid led batteries, industrial batteries, and submarine batteries.
It sells its automotive batteries through a distribution network of dealer outlets primarily to car and two-wheeler manufacturers. It is a leading supplier of batteries for motorcycles, passenger vehicles, commercial trucks and farm equipment.
(9) TVS Motor:
TVS is India’s third largest two-wheeler manufacturing company. The better product mix has helped TVS to improve its operating margins. The two-wheeler company has better rural penetration, which allows them to capture a wide range of the domestic market.
The company also posted consistent volume growth in the near past. We believe that market share will likely to continue to grow and help them to achieve the higher growth.
MindTree is the most promising company in the IT vertical which performs consistently even in the bad phase. The company has attained consistent Ebitda margins of 22 per cent and will likely to continue to the next.
The company has higher traction in digital front should continue to grow with higher momentum. It has robust business structure and healthy balance sheet which makes MindTree more lucrative.