Hope you all are doing good and taking proper precautions.
We recently shared our new stock recommendation with our Premium Members and would like to share with you details about the same.
As discussed in our Risk categorization update, we have been focusing on leading well-managed companies which will probably emerge stronger from this pandemic and capture higher market share in the years to come. Have also benefited from this strategy with stocks like Aarti Drugs, Suven Pharma, Chaman Lal, Manappuram, Asahi Songwon, FIEM Industries, etc. appreciating by 100-400% in the last few months.
Also, if such companies come debt free and with low valuations, one can only blame himself for not buying such stocks during periods of distress.
If you believe in investing in Growth Stocks at Reasonable Valuations, you may find our latest stock report and the thesis behind the same interesting. The stock report was shared yesterday only with Premium Members and included in the Model Sheet.
Disclosure: I have personal investment in the stock and bought it on 25th Sep’20
Our Model Sheets have delivered 23% + return in around 2 years against -3% to -24.5% by NIFTY and other benchmark indices. You can read about it HERE
You can access latest Investment Reports, Special situation opportunities and Model sheets in Premium Memberships at the following LINK
Latest Stock Recommendation
The company we are talking about has the following attributes:
- Market cap > 1,000 crore
- FY 10-FY 19 – ~15% CAGR in sales, 18.5% CAGR in Profits
- Dividend – Consistently paying since 10-11 years
- Debt – Debt free at the end of Jun’20 with some surplus cash
- Avg. Return on Equity (ROE) – 16% + for the last 8 years
- Valuations – Available at around 11.68 times 4 years avg. PAT
- CAPEX – CAPEX of more than 100 crore planned for the next 2 years and will be funded entirely out of internal accruals
- Promoter stake – Higher than 50% with further addition through open market purchases in the month of Mar’20
- Growth Plans – CAPEX for backward integration, New Formulations unit at SEZ for growing exports by more than 300%, launch of new products and replacement of generic products with high margin new launches
Between FY 20-FY 23 we expect the company to record 11-12% CAGR in sales and double its PAT to around Rs 150 crore. Higher growth in PAT is expected on the back of 200-300 bps expansion in Gross and EBITDA margins and reduction in finance cost by around 15-20 crore.
Over the last 10 years, the stock has largely traded in the range of 10-30 times earnings. Assuming 15 times FY 23 earnings, the stock can more than double over the next 3 years.
These days there’re a few decent sized debt free companies with strong operating track record and good outlook available at 10-12 times earnings and yet investors are not willing to touch them even with a barge pole.
A few years down the line many might end up substantially higher and would appear no-brainer then.
Wish you good health and wealth.
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Disclosure (SEBI RA Regulations)
Whether the research analyst or research entity or his associate or his relative has any financial interest in the subject company/companies and the nature of such financial interest – Investment in Suven Pharma, Manappuram Finance and FIEM Industries. Also Aarti Drugs in wife’s and father’s account.
Whether the research analyst or research entity or his associates or his relatives have actual/beneficial ownership of 1% or more securities of the subject company (at the end of the month immediately preceding the date of publication of the research report or date of the public appearance) – No
Whether the research analyst or research entity or his associate or his relative has any other material conflict of interest at the time of publication of the research report or at the time of public appearance – No
Whether it or its associates have received any compensation from the subject company in the past twelve months – No
Whether it or its associates have managed or co-managed public offering of securities for the subject company in the past 12 months – No
Whether it or its associates have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months – No
Whether it or its associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past 12 months – No
Whether the subject company is or was a client during twelve months preceding the date of distribution of the research report and the types of services provided – No
Whether the research analyst has served as an officer, director or employee of the subject company – No
Whether the research analyst or research entity has been engaged in market making activity for the subject company – No