Markets are trading near peak levels of Rs 34,000. It is always difficult to identify multibagger stocks at such high levels, as markets have begun well in 2018. Here are a few stocks that have the potential to be true multibaggers stocks in India in the next 3-5 years.
Reliance Home Finance
The stock of Reliance Home Finance like most other ADAG group stocks was badly hit on account of the debt worries of group company RCOM.
Now that Anil Ambani has announced debt reduction plans of RCOM to just Rs 6,000 crores, in the coming months, we might see improved sentiments for ADAG group stocks.
It is just not sentiments, but, also the fact that there could be good potential for housing finance companies. Reliance Home Finance plans to grow the book size to Rs 50,000 crores in the next few years from just Rs 13,000 crores currently.
The stock is also trading at just around Rs 2 to 2.5 times projected book value.
Reliance Home Finance: Great play on the home finance business
The home finance business has been growing at a brisk rate of 20 per cent. Reliance Home Finance can easily cash in on the good demand potential.
The company has also reported a good set of quarterly numbers for the period ending Sept 30, 2017. Net profits improved to Rs 41 crores from Rs 20 crores in the corresponding period of last year.
The EPS was Rs 1.59 for the period. We believe that Reliance Home Finance can achieve an EPS of Rs 10 by 2018-19. This means the stock is available at a p/e of just 9 times. One can buy and expect a return of at least 50 per cent in two years. A good multibagger stock to buy in 2018.
Jain irrigation manufactures a whole lot of equipment and products related to Irrigation that includes Micro Irrigation Systems, PVC Pipes, HDPE Pipes, Plastic Sheets etc.
The agriculture industry is one industry that is expected to grow rapidly in the years to come, thanks to the government's ongoing thrust in the area.
Recently, the company won an order for Rs 184 crores. The management recently sounded confident of achieving a turnover of Rs 8,400 crores in revenues for 2017-18, which would be a growth of 20 per cent, year on year. Interestingly, the debt to equity is also expected to come down in the coming years.
Valuations of Jain Irrigation
The agriculture sector will remain a priority and the Union Budget for 2018-19 may even boost the budgetary allocation for the sector, given that we have elections slated in 2019.
An increased outlay for the sector could boost prospects for a company like Jain Irrigation. We believe that there is good scope for the company to improve its performance and report an EPS of Rs 10 at the very least in the 2018-19.
This means the stock is quoting at a p/e of just 10 times forward earnings. A good multibagger stock that can generate decent potential in the years to come.
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 8 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
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.