Markets are trading almost 7 per cent lower from peak levels. This has given some opportunities, though even at these levels it is always difficult to identify multibagger stocks. Here are a few stocks that have the potential to be true multibaggers stocks in India in the next 3-5 years.
IndoCount is one of the top textile players in the country. From spinning and weaving to manufacturing, the company is engaged in the entire chain of activity.
It is one of the globe's top players in the bedding business and exports to several countries. In fact, the company exports to as many as 49 countries around the world.
Over the years the company has constantly innovated to produce new and improved products. Indo Count has completed phase-I its capex to increase its capacity from 68 million metres to 90 million mters. In the phase-II of the capex there is a further expansion that will be completed by next year.
Decent Financial performance from IndoCount
Indo Count has seen its share price dip from levels of Rs 210 to the current price of Rs 74, which leaves very limited scope for a downside.
For the year ending March 31, 2018, IndoCount reported an EPS of Rs 6.38. The likely EPS in 2018-19 could be closer to Rs 8. This means the stock is trading at a p/e of just 9 times, one year forward earnings.
As capacity expansion fructifies, there is a potential that the stock could be re-rated and could be a multibagger in the making. In line with small small cap stocks, the stock has seen a sharp fall to Rs 72.
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 numbers for the financial year 2018. The company reported an EPS of Rs 5.55 for the said period.
We believe that Reliance Home Finance can achieve an EPS of Rs 7 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. Having said that, the problem for Reliance Home is that if sentiments for the ADAG group turn for the worse this stock could fall.
However, at the current levels, there is very limited downside risk.
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 sharp rebound in turnover in the coming years. Interestingly, the debt to equity is also expected to come down in the coming years.
Valuations of Jain Irrigation
The agriculture sector was a priority and the Union Budget for 2018-19 in which the minimum support prices was raised.
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 11 times forward earnings. A good multibagger stock that can generate decent potential in the years to come.
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, as well as long-term capital gains tax. 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.