Multibagger stocks always send our pulse racing. If we could discover the art of spotting potential multibaggers, we could be another Rakesh Jhunjhunwala. However, that’s not going to happen in a hurry and so we have to stay content by looking at some of the present multibaggers and see if we can spot a common pattern in them. The beauty is that it may be too early to say that these stocks will not be multibaggers going forward as well. After all, what is to prevent a 10-bagger becoming a 20-bagger? All the factors that made these stocks a multibagger in the first place are still intact (high ROCE, strong brands, quality management, market dominance, reputed management, low debt etc).
TTK Prestige:
This is the mother of all multibaggers returning an eye-popping 71% CAGR in 10 years and a cumulative return of 26,274%. Rs. 1 lakh invested in TTK Prestige on 1.1.2002 at the then prevailing price of Rs. 12.20 is worth Rs. 2.63 crores at the present price of Rs. 3,215.
| TTK Prestige Financial Performance | ||||||
|
(In %) |
FY02-FY07 |
FY07-FY12 |
FY02-FY12 |
FY09-FY12 FY10-FY12 TTM Jun ’12 |
||
|
Sales (CAGR) |
17.21 |
31.43 |
24.12 |
40.10 |
47.39 |
37.76 |
|
Net profit (CAGR) |
75.85 |
57.30 |
66.32 |
71.74 |
47.03 |
27.55 |
|
RoNW (Avg) |
5.32 |
39.35 |
31.72 |
41.99 |
41.74 |
40.06 |
|
Debt-Equity Ratio |
1.59 |
0.32 |
0.95 |
0.05 |
0.02 |
0.03 |
|
Earning yield (Avg) |
2.96 |
4.30 |
4.23 |
3.80 |
3.36 |
3.42 |
|
Mkt returns (CAGR) |
53.28 |
88.78 |
70.11 |
218.79 |
119.19 |
4.41 |
TTK Prestige has benefitted from its product range and distribution together with a strong brand. Its’ sales revenue has grown at a CAGR of 24 per cent in 10 years while the profit has grown at an eye-popping CAGR of 66 per cent.
TTK is presently debt-free and enjoys consistently high RoNW and RoCE. It may have only scratched the surface of the giant market that India is and so is still rated as a good stock to buy.
A good proxy for TTK Prestige is Hawkins Cookers which has found its way into Rakesh Jhunjhunwala’s model portfolio. Hawkins Cookers has been under the weather owing to labour problems and Pollution Control issues at Jaunpur and Hoshiarpur plants. However, this period of underperformance should be taken advantage of it because when (not if) these problems are resolved, the stock will bounce back with a vengeance.
Titan Industries:
Titan Industries, Rakesh Jhunjhunwala’s favourite stock, has also made its investors into millionaires. Rs. 1 lakh invested in Titan on 1.1.2002 at the then price of Rs. 1.03 (adjusted for splits etc) is worth Rs. 1.15 crores today at the CMP of Rs. 222, giving a return of 11,737%.
| Titan Industries’ Financial Performance | ||||||
|
(In %) |
FY02-FY07 |
FY07-FY12 FY02-FY12 |
FY09-FY12 FY10-FY12 TTM Jun ’12 |
|||
|
Sales (CAGR) |
25.93 |
32.88 |
29.36 |
31.28 |
36.07 |
23.80 |
|
Net profit (CAGR) |
50.11 |
43.21 |
46.62 |
54.24 |
54.71 |
24.37 |
|
RoNW (Avg) |
31.87 |
37.75 |
36.74 |
39.83 |
41.44 |
41.17 |
|
Debt-Equity Ratio |
2.28 |
0.24 |
1.26 |
0.08 |
0.03 |
0.01 |
|
Earning yield (Avg) |
3.06 |
2.98 |
2.99 |
2.83 |
2.78 |
3.10 |
|
Mkt returns (CAGR) |
75.88 |
40.28 |
57.08 |
80.30 |
57.59 |
3.40 |
Titan Industries has been a bit under the weather lately owing to the soaring gold prices which has cooled off the customers’ urge to buy jewellry. However, this is a good opportunity to slowly accumulate the stock as in the past, it has always rebounded after periods of non-performance.
Lupin:
Lupin is Rakesh Jhunjhunwala’s favourite stock and has rewarded him richly. Lupin is an excellent buy because it has an aggressive product launch schedule in the US over the next 3 years. Lupin expects to see an 18% growth in the high-margin domestic formulations business.
| Lupin’s Financial Performance | ||||||
|
(In %) |
FY02-FY07 |
FY07-FY12 FY02-FY12 |
FY09-FY12 FY10-FY12 TTM Jun ’12 |
|||
|
Sales (CAGR) |
15.76 |
28.51 |
21.97 |
23.02 |
21.36 |
28.69 |
|
Net profit (CAGR) |
32.81 |
23.52 |
28.08 |
20.46 |
12.63 |
7.03 |
|
RoNW (Avg) |
26.46 |
26.92 |
26.84 |
25.01 |
24.22 |
22.12 |
|
Debt-Equity Ratio |
1.31 |
0.56 |
0.93 |
0.31 |
0.17 |
0.10 |
|
Earning yield (Avg) |
5.17 |
5.09 |
5.11 |
4.35 |
4.19 |
3.89 |
|
Mkt returns (CAGR) |
59.59 |
34.32 |
46.41 |
56.63 |
27.68 |
20.16 |
In the past 10 years, Lupin has grown at a rapid pace of 20% revenue and 27% net profit CAGR. This is expected to continue over the period FY 2012 to 2014 thanks to its plans in the international and the domestic sector.
Rs. 1 lakh invested in Lupin on 1.1.2002 at the then prevailing price of Rs. 8.90 (adjusted for splits etc) is worth Rs. 63 lakhs today, giving a return of 6324%.
Gruh Finance
Gruh Finance is the kind of blue chip stock that one can buy without any thinking. It belongs to the HDFC family and operates in the semi-urban and rural areas of Gujarat and Maharashtra. Gruh Finance has a well-managed asset quality and consistent operating performance with robust NIMs and good operating efficiency. It has high ROAs and ROEs.
Rs. 1 lakh invested in Gruh Finance on 1.1.2002 at the then prevailing price of Rs. 2.90 (adjusted for splits etc) is worth Rs.61 lakhs today, giving a return of 6,100%.
| Gruh Finance’s Financial Performance | ||||||
|
(In %) |
FY02-FY07 |
FY07-FY12 FY02-FY12 |
FY09-FY12 FY10-FY12 TTM Jun ’12 |
|||
|
Total income (CAGR) 11.47 |
28.64 |
19.75 |
19.98 |
28.40 |
40.51 |
|
|
Net profit (CAGR) |
29.89 |
32.37 |
31.12 |
33.77 |
32.10 |
31.63 |
|
RoNW (Avg) |
20.47 |
27.07 |
25.46 |
29.01 |
30.11 |
31.21 |
|
Debt-Equity Ratio |
9.77 |
8.44 |
9.10 |
7.91 |
7.16 |
6.89 |
|
Earning yield (Avg) |
9.50 |
7.31 |
7.65 |
6.59 |
6.04 |
4.99 |
|
Mkt returns (CAGR) |
54.70 |
35.82 |
44.95 |
90.06 |
70.57 |
65.50 |
Gruh Finance is not a cheap stock and is trading at 5 times FY13E and 3.9 times FY14E estimated earnings. However, the premium is well worth it if one looks at its past performance. In the preceeding two years Gruh Finance has had a CAGR in excess of 70%.
Bajaj Finance:
Bajaj Finance is also a blue chip stock belonging to a reputed business family. It is a well-diversified NBFC operating in three segments being consumer finance, SME and commercial loans. Bajaj Finance has seen strong growth in rural retail credit sector and has taken full advantage of that.
| Bajaj Finance’s Financial Performance | ||||||
|
(In %) |
FY02-FY07 |
FY07-FY12 FY02-FY12 FY09-FY12 FY10-FY12 |
TTM Jun ’12 |
|||
|
Total income (CAGR) 29.34 |
40.77 |
34.93 |
54.73 |
56.78 |
57.12 |
|
|
Net profit (CAGR) |
6.88 |
53.81 |
28.22 |
128.85 |
113.21 |
56.13 |
|
RoNW (Avg) |
9.41 |
11.91 |
11.29 |
16.35 |
19.26 |
19.99 |
|
Debt-Equity Ratio |
1.15 |
0.81 |
0.98 |
0.55 |
0.41 |
0.49 |
|
Earning yield (Avg) |
6.69 |
9.32 |
8.63 |
10.47 |
11.02 |
12.07 |
|
Mkt returns (CAGR) |
57.97 |
14.04 |
34.22 |
128.24 |
60.02 |
49.42 |
Bajaj Finance has a RoNW of about 20% and an average CAGR of about 30+%.
Rs. 1 lakh invested in Bajaj Finance on 1.1.2002 at the then prevailing price of Rs. 33 is worth Rs. 31 lakhs today, giving a return of 3100%.
very nice article..shows the power of compounding and having patience..!but it is difficult for the above mentioned stocks to deliver same kind of returns in the future.so how can one identify such stocks which will have the capacity to deliver similar kind of returns if one has a time horizon of 10-15 years?thank you.
That’s a million dollar Q … 🙂 But seriously, while the growth rate may not be as explosive as in the past, the scope for growth is still very high considering the size of our Country. And these companies already have a stranglehold over the market place. So, instead of looking into nooks and crannies and investing in unknown companies, may be much better to invest in these well known companies. Gruh Finance, in just two years, has doubled. Over the same period of 2 years, HDFC Bank has returned 35%. Asian Paints has returned 33% and Nestle has returned 45%. So, a systematic investment in a basket of 10-15 of these blue chips may be all that one needs to have a multibagger portfolio.