Multibagger is a term referred to stocks which have huge growth potential over a period of time. (Reuters)
If you had invested Rs 10,000 in shares of Ricoh India, a player in the area of imaging solutions, on October 7, 2013, your money could have grown to over Rs 1,65,500 by now. Similarly, an investment of Rs 10,000 in Eveready Industries shares two years back would have grown to more than Rs 1,50,000 till October 7, 2015. These are some instances of what are called ‘multibagger’ stocks.
According to market experts, stocks that multiply manifolds in two to five years horizon giving far superior returns than the general markets are called multibagger stocks. There were around 32 stocks that have jumped over 500 per cent in the past two years in the BSE 500 index. Share price of Welspun India, Kitex Garments, Global Offshore Services, Hitachi Home & Life Solutions (India) and Marksans Pharma soared 1,342 per cent, 1,327 per cent, 1,281 per cent, 1,188 per cent and 1,052 per cent, respectively, in the past two years till October 7.
Jayant Manglik, president, retail distribution, Religare Securities, said, “Multibagger is a term referred to stocks which have huge growth potential over a period of time. Usually multibaggers are the companies with new products or services that are expanding profitably, especially young companies.”
Jimeet Modi, chief executive officer, SAMCO Securities, said, “The stock that has the potential to grow revenue exponentially, has sustainable and scalable business model, operates in a sunrise industry, caters to new shift in consumer preferences or causes a disruptive innovation are the likely candidates for multibaggers stocks.”
It is not easy to identify a multibagger stock. One should track the market deeply and patiently and whenever a good bargain is found, one should thoroughly research it. The company should be strong on fundamentals and financials with good track record of management, growing business prospects, dividend payout record, cheap valuations and continued generation of cash flows.
Vineeta Mahnot, equity research analyst, Hem Securities, said, “Stocks with strong fundamentals, promising growth prospects, cheap valuations and potential to generate multiple returns in the near future are termed as multibagger stocks. These type of stocks outpace the market return with their impressive returns.”
Elaborating more on the multibagger stocks’ features, Vinod Nair, head, fundamental research, Geojit BNP Paribas said, “Some of the common features of a multibagger stocks are that a company should have an unique business model coupled high business growth opportunity with a turnaround story, largely in a small size with high scalability and earnings growth (avoid cyclicals) and stocks should be available at attractive valuations due to a temporary disadvantage like heaviness in balance-sheet, cyclical trough phase etc. But the company has a high probability for re-rating with turnaround in business and restructuring in balance sheet.”
With the help of a few brokerage houses we have identified 10 stocks which could become multibaggers over the next few years.
Sintex Industries
Recommended By: SMC Investments and Advisor
Why Buy: The company expects a steady growth of 18-20 per cent in its pre-fabrication business catering to sewage treatment plants, biogas plants and organic waste management structures. With Swachh Bharat Mission picking up momentum, these structures remain key evolving areas, which are likely to aid growth in 2016-17. Company expects its other infra space businesses to also add to its growth target in the light of government’s social initiatives like smart cities, Housing for All and Amrut Yojna in the coming years.
DB Corp
Recommended By: SMC Investments and Advisor
Why Buy: Company’s business fundamentals continue to be strong and the management is confident of its business strategies that have positioned it as India’s largest print media company amongst national dailies. The company is launching 3 more editions in next 3 months in Bihar and some district editions. With this the company will have 24 editions including district editions. Its focus will be on Patna, Bhagalpur, Gaya and Muzzafarpur.
Tube Investments of India
Recommended By: SMC Investments and Advisor
Why Buy: With strong management and excellent future prospects in most of the segments it operates in, the company is expected to benefit from a turnaround in the auto sector’s fortunes. Despite a challenging environment, the company recorded a growth in revenues and profits in the last few quarters. This was a result of company-wide efforts on cost reduction and improved operational efficiencies.
Camlin Fine Sciences
Recommended By: Hem Securities
Why Buy: With the dominant positioning of the key products, backward and forward integration benefits, setting up and then commissioning of the new facility at Dahej and sound fundamentals; the company is poised to grow manifold in the times ahead.
SML Isuzu
Recommended By: Hem Securities
Why Buy: Improved capacity utilisation, higher per unit realisation owing to lower discounts, expanding dealership network and new product launches bodes well for the growth of SML in times ahead.
Allcargo Logistics
Recommended By: Hem Securities
Why Buy: Allcargo has strong presence across all lines of businesses i.e. MTO, CFS and P&E businesses. It has emerged as the second largest player in the LCL consolidation business globally and is the only Indian player who has a strong presence across multiple logistics businesses of CFS, contract logistics, project logistics, equipment leasing and coastal shipping in India.
Astra Microwave Products (AMPL)
Recommended By: Geojit BNP Paribas Financial Services
Why Buy: A niche player, in manufacturing subsystems for radars, missiles & electronic warfare products. Government’s thrust on domestic manufacture of defence equipments and hike in FDI limit will bring more opportunities to private players like AMPL. Opportunities in defence electronics is estimated to be at $70bn for next 10years, of which $58bn is for subsystems. Considering the need for high-end electronic warfare equipments, ramp-up in missile programmes and integration of radars in various other defence programmes, Geojit BNP Paribas Financial Services believes AMPL will be a key beneficiary.
PVR
Recommended By: Geojit BNP Paribas Financial Services
Why Buy: PVR the largest multiplex chain in India with 467 movie screens, is expected to scale up its operations through aggressive screen addition by expanding into new locations. PVR’s F&B (Food & Beverage) segment has significant growth opportunity from increased in-house F&B and higher conversion of footfalls into F&B spends. Further, profitability has room for significant improvement by optimising F&B & film distribution costs with economies of scale. PVR’s premium ticket pricing (highest Average Ticket Price in the industry) will help to retain profitability with screen additions.
Natco Pharma
Recommended By: Edelweiss
Why Buy: It is a R&D focused company, with a strong product pipeline to deliver substantial earnings growth.
Somany Ceramics
Recommended By: Religare Securities
Why Buy: Somany Ceramics is the third largest organised tiles player in India with a focus on tier-2 and 3 cities. The company has more than doubled capacity to 42.5 msm over FY10-FY15 and plans to ramp up to around 55msm by FY17. Its asset-light expansion drive primarily through joint venture partners and improving profitability should aid return ratios.
(Disclaimer: The stocks are recommended by the respective brokerage houses and not a recommendation from Financial Express online)
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