The stock market is currently volatile. However, it also presents investment opportunities for those who are looking for big gains by taking some risks.
The stock market is currently volatile and huge ups and downs can be seen in the markets. However, it also presents investment opportunities for those who are looking for big gains by taking some risks. Thankfully, even small investors can now look for investing in the market as some potential multibaggers can be bought for just a few thousand rupees. Here we are taking a look at 5 such stocks which you can buy for less than Rs 5000.
The company provides integrated engineering services in Europe, North America and the Asia Pacific to aerospace, defense and marine sectors. Its revenue is growing with 16.4% CAGR and the company has a strong balance sheet. “In FY17, though profit margin has declined to 2.7% from 7.6% in FY16, it is a good stock to ride on defense story at a time when it is trading at lower levels. At the present price of Rs 140, you can buy 35 shares of this company for Rs 5000,” says Ashish Kapur, CEO, Invest Shoppe India Ltd.
It is a good company in steel manufacturing and EPC, and has a well-managed working capital with CCC of just 2 days. In FY16 it acquired Singapore-based EPC company, which has expanded its market and service line and has resulted in better margins. The company is fairly leveraged (1x of D/E ratio) with stable EBITDA margin of 14%. Valuations (P/E of 5x) look attractive and the stock present has huge upside with previous highs of ~125 levels. At the present price of Rs 87, you can buy 57 shares of this company.
Elecon Engineering Company Ltd manufactures and sells power transmission and material handling equipment in India and internationally. The company primarily operates through two segments – Material Handling Equipment (MHE) and Transmission Equipment (TE). Though the share of MHE segment, in terms of revenue, has come down to 36.0% in FY16 from 42.4% in FY13, however, the lastly reported order book (Q3FY17) reflects share of 43.8%, translating into better visibility. In addition to this, the recent order wins worth Rs 130 crore in the chemicals sector should have boosted the sentiments for its MHE segment. This segment may start witnessing strong traction from the government measures for recovery in core sectors of the economy.
TE/gear business has been holding its ground with augmented order book worth Rs 706 crore and operational efficiency. Moreover, the operating margins have improved considerably from 8.3% in FY13 to 13.4% in FY16, which is a positive sign for the business. From an order book perspective, the major contributor has been the order worth Rs 530 crore received in the marine defense space.
“We value the stock at 7.0x of FY19E EV/EBITDA and 17.0x of FY19E EPS. With these valuations in mind, we arrive at target price of Rs 96 which presents an upside potential of ~100%. At the current price of Rs 48, you can buy 104 shares of this company for Rs 5,000,” says Kapur.
Pricol Ltd manufactures and sells automotive components and precision engineered products in India and internationally. It was incorporated in 1972 and is based in Coimbatore, India. It has three manufacturing plants in Coimbatore, one in Manesar, one in Pune and one in Rudrapur. Apart from India, the company has each manufacturing unit in Jakarta, Indonesia and Sao Paulo, Brazil and business offices in Tokyo, Singapore, Cologne – Germany and Detroit – USA.
Pricol, on the back of robust revenue growth led by strong order book, expects good momentum in FY17 and the years to come. It is targeting a revenue growth of 20-25 percentage in the next few years in line with the vision to hit its revenue at Rs 3000 crore by 2020. Further, the company has exited from its non-core product in order to focus on key products and has restructured its cost to increase the profitability. The company plans to become one of the leading automotive solutions provider in the world by establishing two greenfield projects and making overseas acquisitions for which it will set apart Rs 500 crore. It is planning to establish greenfield projects in Vietnam and Mexico. The expansion plans are part of its Vision 2020 to become a top player in the global arena by entering new markets and achieving a consolidated revenue of Rs 3,000 crore.
The company has very less debt and does not incur huge interest outgo. The debt equity ratio, at 0.29x, remains at quite comfortable level and provides room to raise capital to fuel expansion plans.
At the CMP of Rs 94, Pricol is trading at 19.0x its TTM EPS of Rs 4.9. However, “given the company is on an expansion spree and expects to continue growing higher than other global tier-1 auto suppliers (refer table below), the stock is expected to re-rate once it starts making some announcement on acquisitions. We expect the company to post healthy performance in FY18E and FY19E. We attach multiple of 15x its FY19E EPS of Rs 10 to arrive at the target price of Rs 150. This target implies upside potential of~85% and achievable in one year. At the current price of Rs 81, one can buy 61 shares of Pricol for Rs 5000,” informs Kapur.
Minda Corp Ltd
Minda Corp, being one of the few auto components companies, has dominant presence in high growth segments such as electronic sensors, telematics, security systems and aftermarket. The company has shown decent growth in the past driven by expanded product portfolio and end-market with the help of successful acquisitions and joint ventures. “The outlook appears sanguine on the back of favorable industry dynamics and company-level operational efficiencies. Given this, the stock appears reasonably valued with PEG ratio of close to 1 (top line growth vs PE ratio). In case the company sustains the current topline growth coupled with improvement in margins, the stock can present good upside,” says Kapur.
The company is a dominant player in one of the highest growth segments in auto components space. It has reported 23% revenue CAGR over the last 3 years (FY14-FY17). This growth has primarily been driven by its presence in high growth segments such as Driver Information & Telematics and Safety, Security & Restraints systems.
The company reported one of the highest gross margins amongst its peers during FY17. However, due to its higher operating expense at 31.4% of total revenue, it has one of the lowest EBITDA margin amongst peers. Higher operating cost can be attributed to highest SG&A expense.
The outlook for Minda Corp remains favorable from both growth and operational efficiency perspective. While on top-line front its commitment in bringing technologically advanced products coupled with stricter emission norms is likely to result-in higher healthy revenue growth, its key subsidiary “Minda Furukawa” is likely to turn EBITDA positive in the current financial year. “At current market price of Rs 109, the stock is trading at 24x FY17 EPS of Rs 4.7, 16x FY18E EPS of Rs 6.8 and 11x FY19E EPS of Rs 10.0. One can ‘BUY’ the stock and it can be valued at 15x FY19E EPS of Rs 9.7 with a target price of Rs 148, indicating 37% upside from CMP. At the current price you can buy 45 shares of Minda Corp,” says Kapur.
Or, alternatively, you can buy all these five stocks for less than Rs 5000!
(Disclaimer: These stock recommendations have been made by Invest Shoppe India Ltd. Although due care has been taken while making these recommendations, investors are advised to consult their financial advisors before investing in any stock based on these recommendations.)