Investing in the stock market is like being on a thrilling roller coaster ride – it’s exciting, it’s exhilarating, and it can leave you feeling both scared and amazed at the same time. But fear not! With the right mindset and a bit of luck, you could be on your way to discovering the next multibagger stocks that could change your life forever.
Peter Lynch, the legendary investor and author of the best-selling book “One Up On Wall Street”, popularized the term “multibagger” – stocks that have more than doubled in value and has the potential to deliver returns of two, three, or even more times the initial investment. Multibagger stocks are like finding a diamond in the rough or discovering a hidden treasure that has been waiting for you all along.
But to achieve such remarkable returns, you need to be patient and willing to take calculated risks. The stock market can be a daunting place, but with the right research and guidance, you can navigate through it like a pro. And when you find that multibagger stocks that have the potential to skyrocket, it’s like hitting the jackpot – the rewards can be life-changing!
Factors influencing multibagger stocks
Business growth possibilities
A company’s growth prospects are a crucial indicator of its potential of delivering multibagger returns. Businesses with excellent growth potential and a clear path to that growth are more likely to be multibagger stocks, offering significant long-term profit potential for investors, like Blue Chip Stocks.
Industry growth potential
Businesses operating in industries with significant growth potential are more likely to become multibagger stocks. Sectors that are quickly developing and have an extensive capacity for development often provide more effective opportunities for organizations to grow and create large profits.
A significant competitive advantage may assist a company in maintaining its market position and achieving high earnings growth in the long run therefore businesses with a sustained competitive edge are also more likely to become multibagger stocks.
The financial performance of an organization is a crucial aspect in assessing its potential of becoming multibagger stocks. Businesses with good economic performance, such as high revenue growth, high-profit margins, and low debt levels, are more likely to earn considerable long-term returns.
A company’s value is crucial to examine when determining its potential to become multibagger stocks . A company undervalued by the market may have tremendous upside potential, whereas an overpriced company may have limited opportunity for significant gains.
Important Ratios to Consider Before Investing in multibagger stocks
Return on Equity (ROE)
The Return on equity (ROE) ratio assesses a company’s profit concerning the shareholder equity invested. Businesses with a high ROE are often considered more appealing for investment since they generate more profit per dollar of shareholder equity. This has the potential to result in multibagger returns.
Free Cash Flow (FCF) Ratio
The Free Cash Flow (FCF) ratio the cash generated by a company’s activities after deducting capital expenditures. Businesses with a high FCF ratio may have greater freedom to engage in growth prospects, potentially leading to multibagger returns.
Price-to-Earnings (P/E) Ratio
The Price-to-Earnings (P/E) ratio compares the current stock price of a company to its earnings per share (EPS). A low P/E ratio may imply the company is cheap, making it an excellent investment candidate. A high P/E ratio, on the other hand, may suggest that the company’s stock is overpriced, limiting the possibility of multibagger returns.
Price-to-Book (P/B) Ratio
The ratio compares a company’s stock price to its book value. A low Price-to-Book (P/B) Ratio may imply the company is cheap, making it an excellent investment candidate. A high P/B ratio, on the other hand, may signal that the company’s stock is overpriced, limiting the possibility of multibagger returns.
5 Multibagger stocks to look for potential returns
|Gravita India Ltd|
|Stylam Industries Ltd|
|Poonawalla Fincorp Ltd|
|CCL Products (India) Ltd|
|Kirloskar Pneumatic Company Ltd|
Gravita India Ltd.
Gravita India Ltd., first in the list of potential multibagger stocks, was created in the early 1990s, built its first recycling facility in Jaipur, Rajasthan, in 1994. The company makes lead by recycling lead-acid batteries. In addition, the company has grown into metal and plastic recycling. Diversification into the rubber, steel, copper, and paper sectors is also planned.
The company is based in Jaipur, with recycling facilities across India and also in Africa. GIL was the first to set foot in Africa. African businesses are free from paying taxes until the fiscal year 2028-29. Because Mozambique, Senegal, and Tanzania are Least Developed Countries (LDC), 80-85% of re-melted lead (RML) produced there is imported tax-free to India (other countries have a 5% charge). Ghana has an FTA with Europe, where it sells most of its refined lead and alloys. As of today’s date, this is the share price of Gravita India Ltd.
- In Q3FY23, the overseas business provided 65% of the company’s operating profit. Volumes and realizations drove revenue growth, with lead prices increasing by 6% QoQ and value-added products (VAP) accounting for 45% of the sales mix. During 9MFY23, capacity utilization was 65%, with lead/aluminum/plastics usage at 70%/45%/45%.
- Gravita’s capex in 9MFY23 was Rs 881.2mn, with a consolidated total capacity of 228 KTPA after the quarter. The debt was Rs 3.15 billion after the fiscal year.
- The Mundra facility is now operating at 96% capacity. Mundra’s total capacity is planned to be 60 KTPA, with the primary activity being the import of scrap and subsequent export of the recovered product.
- Management believes that the aluminum segment’s EBITDA margin of Rs 18-19/kg is sustainable in the medium term, with most of the profits from abroad markets.
- The company hedges the bulk of its lead volumes; however, on the aluminum front, hedging is limited to items accessible on MCX. The company is working to have more aluminum alloys registered there.
- Due to more significant sales and higher lead prices, the gross margin was lower in Q3FY23 at 18%. The company’s unit margins of Rs 16- 17/kg in the lead, Rs 18/kg in aluminum, and Rs 10/kg in plastics were unchanged in Q3FY23. Lower gross margins were also influenced by a more significant percentage of Indian business in the overall mix during Q3FY23.
- Management maintained its projection of a ~25% volume CAGR from FY23 to FY26E and a ~35% PAT CAGR during the same timeframe. The estimated EBITDA margin is 9-10%, with a steady-state gross margin of 20-22%. Management aims for a ROCE of 25% or above for new projects.
- Capex projection for existing verticals was Rs 800 million per year, while that for new verticals (Li-ion, copper, steel, paper, rubber, and so on) was Rs 2-2.5 billion. The business intends to pay capex for existing verticals using internal accruals and new ones with a debt-equity mix. This includes any additional operating capital required.
- The company intends to keep its net debt to equity ratio around 0.75x and its net debt/EBITDA ratio under 1.5x. Gravita expects international factories to pay for themselves in two years and Indian plants to pay for themselves in three years.
- Technical cooperation is being discussed with Li-ion recycling players in Europe, Japan, and Israel. Management anticipates that commercial amounts of lithium scrap will be accessible in 5-7 years, and it intends to conduct a lithium-ion trial project in Mundra.
- By increasing domestic sourcing, the business intends to reach 65 days of working capital over the next two years, up from the present run rate of 80 days.
To get more financial insights and know the Gravita India Ltd share price, click here.
Stylam Industries Ltd.
Stylam Industries, second in the list of multibagger stocks, makes decorative laminates under the trade name “STYLAM,” Its goods are mainly exported to European and Southeast Asian nations. The business has over 30 years of industry expertise. It operates Asia’s most significant single-location laminate production factory, with a varied product offering that caters to various client demands. They also entered a new market by installing a short-cycle press capable of laminating impregnated paper on Medium Density Fiber (MDF) panels.
They are a World Leader in the “Hot Coating Process” of PU+ Lacquer coating on thin laminates. This one-of-a-kind Hot Coating Process equipment is built with unique KLEIBERIT and BARBERAN technology. Stylam has one of Asia’s most extensive single-location laminate production operations, with a 44-acre footprint and the capacity to produce 14.3 million sheets annually and this is the share price of Stylam Industries Ltd
Revenue is generated through exports to over 65 nations, with the remainder coming from our presence across the Indian subcontinent. Furthermore, the company is a Solid Acrylic Surfaces pioneer in India, creating the first production line to manufacture these goods in India. The company has received NSF International, USA, certification for its solid acrylic surface products.
- Stylam’s revenue increased by 32%, EBITDA increased by 19%, and PAT grew by 54% year on year but declined by 5%/1%/1% quarter on quarter, owing to a 6% decrease in laminate quantities and exports. Although the gross margin dropped 0.25% year on year to 44.1%, the EBITDA margin increased 0.75% yearly to 16.8% due to decreased other expenditures.
- The lower depreciation (Rs 38 million vs. Rs 60 million QoQ) was due to the age of some assets. Euro fluctuations led to increased borrowing expenses (Rs 41mn vs. Rs 13mn QoQ). Net debt was lowered by Rs 360 million QoQ to Rs 470 million as of December 31, 23.
- SYIL reported a 5% QoQ reduction in revenue (Rs 2.34bn) due to a drop in exports (down 6% QoQ at Rs 1.54bn, 66% mix), with domestic sales steady at Rs 800mn. In addition, due to logistical challenges caused by the Ukraine-Russia crisis, 3 million laminate sheets (1.3 million domestic) QoQ volumes were 6% lower.
- Management anticipates sales momentum to increase in the fourth quarter after the situation stabilizes. Customers, China+1 strategy, and SYIL’s strong ties with its distributors will continue to fuel its export business. SYIL is also expanding its presence in new areas (such as the United States and South America) while improving its penetration in existing ones.
- SYIL has invested Rs 2 billion over the previous 4-5 years to develop its laminate production (from 6.4 million to 14.3 million sheets) and introduce new products (acrylic panels, pre-lam MDF boards). SYIL strives to increase its laminate capacity by 40% through line balancing and modernization, operational in FY24 at 80% plant utilization.
To get more financial insights and know the Stylam Industries Ltd share price, click here.
Poonawalla Fincorp Ltd.
PFL (formerly known as Magma Fincorp Limited [MFL]), third in the list of multibagger stocks, is a non-deposit-taking systemically significant non-banking finance company (NBFC) regulated with the Reserve Bank of India (RBI). Magma Leasing Ltd, founded in 1989, joined the lending sector.
It was renamed MFL in 2008 and PFL in 2021 following RSHPL’s purchase of a 60% controlling share (the entity owned and managed by Mr. Adar Poonawalla).
PFL’s consumer and small business finance product offerings include house loans, personal loans, pre-owned auto loans, business loans, LAP (Loan against Property), and general insurance and this is the share price of Poonawala Fincorp Ltd.
As of March 31, 2022, it operated through a network of 242 branches spread throughout 21 Indian states. PFL has informed stock markets that its board of directors authorized the sale of its home finance business, PHFL, to Perseus SG Pte Ltd, an entity linked with TPG, for a pre-money equity value of 3,900 crores on December 14, 2022, subject to regulatory clearances.
- The company’s operating success was underpinned throughout the quarter by improved NIMs (Net interest margin) of 10.7% and targeted AUM growth of 10% QoQ / 75% YoY. Notwithstanding the alignment with new NPA rules, the standalone gross stage-3 pool decreased by 8bps QoQ to 1.69%, while the net stage-3 collection fell by 5bps to 0.89%.
- Standalone disbursements increased 8% quarter on quarter / 157% year on year at Rs33.7 billion, marking the company’s highest-ever quarterly disbursements. As a result, consolidated disbursements were Rs 39.8 billion (increased 116% year on year / 7% quarter on quarter). Additionally, focused AUM increased by 10% QoQ and 75% year on year, while discontinued AUM decreased by 6% QoQ and 28% year on year.
- By the end of FY23, the legacy book will be less than Rs 5 billion, essentially nil by Q1FY24. Most of the Rs 22 billion direct assignment portfolio will be depleted over the next six quarters. Given the portfolio’s continually increasing disbursement momentum and diverse product suite, management anticipates it to increase by more than 35% annually on a sustainable basis over the medium term.
- Small company loans, consumer loans, pre-owned vehicles, modest personal loans, and LAP are among the targeted product areas. In addition, the company’s contribution from the distribution pillars of direct, digital, and partnerships is growing (DDP). DDP disbursements accounted for 66% in Q3FY23, compared to 54% in Q2FY23, 39% in Q1FY23, and 24% in Q4FY22.
- The DDP model applies to all of the company’s goods. Management projected AUM growth of 35-40%, PAT growth of 30-35%, GNPA of less than 2% (precisely 1.3%-1.8%), NNPA of less than 1% (precisely 0.5%-0.8%), and RoA of 4-4.5%.
- Small company loans, consumer loans, pre-owned vehicles, modest personal loans, and LAP are the five emphasis items for the next three years. For the following three years, the mix will be 70% unsecured and 30% secured (preowned cars, LAP, and machinery).
To get more financial insights and know the Poonawalla Fincorp Ltd share price, click here.
CCL Products (India) Ltd.
CCL, fourth in the list of multibagger stocks, was founded in 1994 and began commercial operations in 1995. It is an Export Oriented Unit (EOU) with the potential to import green coffee from anywhere in the world and export it to anyone in the world duty-free. CCL has used Swiss and Brazilian technology in its facilities, obtained from world-renowned leaders in turnkey instant/soluble coffee technologies.
This has enabled it to manufacture international-grade soluble coffee with over 250 mixes, which is being sold to over 90 countries globally.
Currently, the company is India’s largest maker and exporter of instant coffee (38% market share) and the top participant in the private label sector (10% market share). CCL has four plants: two in India, one in Vietnam, and one in Switzerland.
CCL Products Ltd. (CCL) manufactures instant coffee granules/powder from raw coffee beans. It also boasts the world’s largest single-location factory, and its clientele includes leading private-label instant coffee producers worldwide.
- CCL reported 26.5%/5.7% YoY/QoQ sales growth in Q3FY23. The volume was reduced by 5–6% due to the maintenance downtime of the Indian facility and the partial output of the Vietnam plant (additional capacity).
- Nonetheless, management is optimistic that incremental volumes from Vietnam will compensate for weaker growth and has maintained its volume growth target of 20-25% for FY23 and 15-20% for FY24. Volume increased by 18% year on year in 9MFY23 and this is the share price of CCL Products (India) Ltd.
- Strong coffee inflation resulted in a 20% rise in realizations, which drove the EBITDA margin down 310 bps to 18.8%, but because the company runs on a cost-plus basis, the impact on EBITDA/kg was modest.
- Interest costs climbed 200% yearly to Rs 11 Cr due to higher interest costs, capacity commissioning, and increased working capital requirements. On the other hand, PAT grew by 26% year on year due to decreased taxes.
- The India operations tax rate was lower in Q3FY23 because it was subject to MAT after claiming higher depreciation under the IT Act for packing capacity.
- CCL has already begun trial runs and will commercialize the new 16,500 MT capacity in Vietnam (bringing Vietnam’s total capacity to 30,000 MT). In addition, in Q1FY23, it announced a proposal to add 16,000MT of spray-dried capacity at its Chittoor facility for Rs 320 Cr.
- The capex will be financed by both loans and internal accruals. According to management, the facility will be commissioned by the end of FY24 and is predicted to create an RoE of 20%, which is greater than its current ROE due to the new plant’s sophisticated technology.
- Furthermore, in Q3FY23, the business proposed expanding 6,000 MT of Freeze Dried (FD) capacity in Vietnam. This factory is planned to be operational by Q3FY25. The entire cost is roughly USD 50 million, which includes a USD 30 million loan.
- The reasons for this expansion are as follows: a) the present FD capacity has been pre-booked through FY24, and b) a promise by an existing client to purchase 3000 MT each year, or 50% of the capacity, for the next five years. In addition, the growing share of wallets from current customers reflects CCL’s reputation as a provider.
To get more financial insights and know the CCL Products (India) Ltd share price, click here.
Kirloskar Pneumatic Company Ltd.
Kirloskar Pneumatic Company Ltd (KPCL), part of the Kirloskar Group and fifth in the list of multibagger stocks, is a key participant in India’s Air, Refrigeration, and Gas Compression market, has serviced numerous industries worldwide by utilizing its design, research and development, production, and innovation skills.
They specialize in producing complex and high-tech items by using cutting-edge production processes. Oil and gas, steel, cement, food processing, railroads, air separation, cars, defense, and maritime are among the industries they service.
Shares of Kirloskar Pneumatic Company Ltd. are solely traded on the BSE.
The majority of the company’s output is compressors and compression systems for the air, refrigeration, and gas sectors.
The global air compressor business is valued at more than $25 billion and is increasing from 3% to 4% annually. Reciprocal compressors, screw compressors, and centrifugal compressors are the three primary product groups. KPCL has long been an essential player in the reciprocating compressor sector.
The global industrial and process refrigeration business is worth more than $9 billion and is increasing by more than 3% annually. This is a ‘global’ company since it can manufacture these plants/packages anywhere and sell/install them internationally. In India, KPCL is a well-established participant in this market.
Lastly, the gas compression sector is the most rapidly expanding process gas industry. This sector is valued at more than $6 billion and is increasing at more than 10% due to new hydrogen and CO2 sequestration potential.
- The company recorded sales of Rs 312 Cr in Q3FY23, up from Rs 295 Cr in Q2FY23, resulting in a 6% QoQ increase and a 37% yearly growth, i.e., Q3FY22 227 Cr.
- PAT for Q3FY23, on the other hand, is 33 Cr, representing a 22% QoQ rise and a 175% YoY increase. Annual revenue was Rs 1021 Cr, and PAT was Rs 85 Cr in FY22, representing a 24% increase in sales and a 33% increase in PAT.
- Management expects sales to double in the next two to three years, reaching INR 20 billion by FY25E. The business released its growth prediction for each division to accomplish sales objectives.
a) Gas: The government intends to construct 6,000 new gas stations, 60% of which will be booster compressors, and the remaining will be online or mother stations. With a foothold in this area, the company expects to get at least 3,000 compressor orders.
b) Air: the company seeks to increase its market share by INR 50 billion, by offering freshly designed screw compressors (75% market share for screw compressors).
c) Refrigeration: by continually developing new products, the company has targeted industries such as dairy, pharmaceutical, food processing, beverages and breweries, oil and gas, pharmaceutical, chemical and fertilizer, and so on. The company introduced the Khione series Screw Compressors, which have a refrigeration import market of INR 1.5 billion.
To get more financial insights and know the Kirloskar Pneumatic Company Ltd share price, click here.
To conclude, multibagger stocks are enormous winners that may make you a lot of money if you choose the right ones. Yet, let’s be honest; life isn’t all rainbows and unicorns. Investing in stocks is a risky business because the odds can go against you! So you should do your research before diving in.
Examine the company’s finances, management team, competitors, and possibilities for development. Remember to diversify your assets to spread the risk.
Another thing to remember is that past success does not automatically guarantee future success.
Just because a stock has previously been a multibagger does not guarantee that it will continue to be a winner. Market circumstances might shift, and a company’s fortunes can suffer as a result.
However, keep in mind that not all multibagger stocks are made equal. Some may have a greater risk profile than others, and it is your responsibility to decide if the possible rewards outweigh the dangers. Make educated judgements based on sound study and analysis rather than being persuaded by hype or supposition.
Leave a Reply