Stocks that can multiply your returns several times over are called multibagger stocks. These stocks can be held for several years and they are not stocks that can mint money for investors overnight. Here are a few stocks that have the potential to be true multibaggers stocks in India in the next 3-5 years.
Balasore Alloys is a manufacturer of Ferro Chrome, an input in the steel industry. Ferrochrome is an alloy that combines chromium and iron containing anywhere between 50 per cent and 70 per cent chromium.
Balasore Alloys is among the very few companies in India that has its own mines. These are located in Jaipur. The ferrochrome industry is growing at a very rapid pace and this is now beginning to be reflected in the results of Balasore Alloys.
The company reported a superb set of results for the quarter ending June 30, 2017. Net profits of the company surged to Rs 24 crores for the quarter ending June 30, 2017 from a mere Rs 5.06 crores in the corresponding period of last year.
Why Balasore is a great multibagger stock pick?
This is a great multibagger stock pick for a number of reasons. First is that the company is constantly reducing its debt. This is going to start getting reflected in the financial results very soon.
Demand for ferrochrome and margins are only likely to improve going forward. Being a holder of captive mines and a low cost producer are other advantages. Valuations too offer great comfort.
For the quarter ending June 30, 2017, the company reported an EPS of Rs 2.46. We are confident that the company can end the year with an EPS of Rs 10 for 2017-18. This makes the stock attractive at a p/e of just about 6 times. This stock is a multibagger stock in the making.
The shares of Balasore are not listed on the NSE. Check stock quote of Balasore here
Welspun India is the world's largest home textile company with a strong presence in bath, flooring and bed. The company supplies its products to 17 of the top 30 retailers in the world.
The company is ranked as the "No1" home textile supplier in the world. One of the largest markets and consumers for bed sheets is the US, where more than half of the market is controlled by Indian companies. India being the largest producer of cotton would continue to benefit a company like Welspun India.
The company has the advantage of also being a vertically integrated player with solid global distribution network and a marquee set of clients. In fact, Welspun India commands a market share of 21.7 per cent in the US towel market and a 11.7 per cent share in the US sheets market.
The backward integration into spinning, weaving and processing has helped to make it a very cost effective player. The company also has a captive power generation unit.
Financials of Welspun India
What makes Welspun India a great multibagger stock to buy are a number of things. Take a look at the financials.
The company has been a consistent performer and for the quarter ending June 30, 2017 has managed to bring down its net debt to equity levels to 1.2 from 1.3 in the year ending March 2017.
The company reported a net profit of Rs 12.43 crores for the quarter ending June 30, 2017. The company reported an EPS of Rs 1.24 for the said period. However, going forward we see an improvement in performance, which should take the FY 2018-19 EPS to Rs 8 at the very least. The stock price at Rs 67 is hence undervalued and has the potential to rise given a p/e of under 9. Check stock quote of Welspun India here
Chennai Petroleum is an excellent play on falling crude prices. The company refines crude oil and converts the same into petroleum products. Lower crude oil has benefited most companies fro the sector including Chennai Petroleum.
This is another good multibagger stock idea that could also be invested for steady growth and income. For 2016-17, the company had an exceptional performance with EPS touching Rs 70.
The dividend yield on the stock is a cool 6-7 per cent. It is unlikely that crude oil will rise anytime soon. Buy Chennai Petroleum on every decline. The stock is currently trading at Rs 404. A drop to levels of Rs 380 would be ideal for stock pickers.
Taxation on multibagger stocks
Remember, that if you make money from a multibagger stock in India, you are liable to pay taxes on the same. At present the government has specified a short term capital gains tax, if you sell the stock before a period of 1 year. So, make sure that you hold the stock for the really longer term, as there would be no tax that would be applicable, if you sold the same after one year. Here we are largely talking of capital gains tax that arises when you sell an asset at a profit after you buy and sell the same.
Another fact that we need to mention is that nobody knows what a multibagger stock would fetch and how it is defined. Normally, a stock that can multiply your money over a period of time is termed as a multibagger stock in India. How any times and how many years is a question that very few people can answer. In any case there are scores of examples, where individuals have made lots of money in stocks that have been really multibaggers. Classic examples are stocks like Eicher Motors, which has multiplied the money of individual shareholders several times over. These are the kind of stocks that you should look for.
Greynium Information Technologies Pvt Ltd, its subsidiaries, associates and the author do not accept culpability for losses and/or damages arising based on information in this article. The author and his family do not own any shares in the above mentioned stocks.