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Seven Stock picks during bad times for during bearish market tone
1 Oct 2017
Indian economy is not really going through bad times, but the going is getting tough of late as two defining moves of the Modi government - last year’s cash ban and this year’s tax overhaul - have slowed down the engines of growth.
The stock market rallied some 22 per cent through the first eight months of the calendar, only to hit a major speed bump in the month of September when the reality of weakening fundamentals caught up with surging stock prices. Stock valuations are now a constant worry, corporate earnings revival looks distant and private capex imperceptible. There are businesses growing through all of this.
8K Miles - IT firm 8K Miles has growth its profit from Rs 2-4 crore in FY11-13 to Rs 104.15 crore in FY17. The company offers consultancy, solutions and vending services to Amazon Web Services (AWS) and has similar partnerships with Microsoft Azure, IBM and Google Cloud Platforms, among others.
Sales for this cloud solution provider has risen from Rs 16-26 crore in FY11-13 to Rs 534.38 crore in FY17. It reported 90.93 per cent compounded annual sales growth and 114 per cent growth in adjusted profit in last five years and 130 per cent sales growth and 193 per cent profit growth in last 3 years. The stock trades at 432 times its FY17 standalone earnings and 9 times its consolidated earnings.
Avanti Feeds - Prawn and fish feeds manufacturer and shrimp processor and exporter Avanti Feeds is another story. Its stock has been among the best multibaggers this year. The stock has rallied 5,000 per cent in five years. Data showed that the company's exports growth have been impressive in last six-seven quarters and higher shrimp prices and weaker fishmeal prices are boosting margins. The company posted profit growth at around 48 per cent compound annually for last five years, while sales grew at a similar pace. The company has been a consistent dividend payer too. The stock is trading at 29 times its FY17 earnings, or 16.3 times its book value for the year.
Avenue Supermarts - (D-Mart) - Retailer Avenue Supermarts (D-Mart) can be counted one among them. Shares of the company have seen an euphoric rally ever since they got listed recently. The retailer has been reporting steady numbers and best inventory turnovers. The stock is up 250 per cent (over issue price) since its listing on March 21 and trades at a PE multiple of 125. Goldman Sachs earlier this week valued it at 29 times FY29 earnings giving it a market capitalisation of almost Rs 1 lakh crore, a 44 per cent premium to the current market cap of Rs 69,698 crore. It projected DMart to grow at an average of 24 per cent in 2020s, 14 per cent in 2030s and 9 per cent in 2040s. Its EBIT is expected to grow 13 times in next 10 years.
Three other names - Caplin Point Lab, PVR and RBL Bank - have grows profits and sales at 30-50 per cent over the past five years. Their stocks have been trading at price multiples of 30-60 on consolidated basis.
Motilal oswal financial services is also one of the top pick and this is clear if you see its technical chart from last two years.The stock price was near Rs 100 in first quarter of 2014 and currently stock is trading above Rs 1200.