For investors with a healthy risk appetite, the mid and small cap segments can potentially produce multibaggers in times to come. Here are some top Diwali stock picks.
By Ashish Kapur
We are surely living in very interesting and disruptive times. Structural reforms led by GST are phenomenal in nature. So, while there would be some pain and worries in the near term, the long-term story looks more exciting than perhaps ever before. More than anything else, the process of formalisation of the economy unleashed by demonetisation and GST will result in a phenomenal growth of the corporate sector in the years to come. The growth in percentage terms would be maximum in the mid and small cap segments. For investors with a healthy risk appetite, these are the segments which can potentially produce multibaggers. With this in mind, I present 5 mid cap ideas for brave investors:
1. Minda Corporation: This is a very well-managed auto ancillary company present in high growth segments of security systems, sensors and interior plastics. The company has established relationships with nearly all important OEMs in the two wheeler as well as the four wheeler space. It also has a good geographical print with factories in Germany, Mexico and other places. Both security systems and sensors are likely to be great growth opportunities going forward. Electric and hybrid cars as well as driverless cars would need far more sensors than being used at present. Technology is a very important element in these segments. Keeping this in mind, the company has recently set up a state-of-the-art technology research and development laboratory at Pune. Implementation of the new NCAP norms by the end of 2018 will ensure that all vehicles get frontal air bags by 2020. This will result in a significant increase in revenue of Minda Furukawa – their joint venture for air bags. Also, the performance of Minda Furukawa has been tepid in the last few quarters due to ongoing restructuring. Once this process gets completed, the overall performance of the company will get a further fillip. Hence at the current price of Rs 140, Minda Corporation presents a very exciting investment opportunity.
2. Kridhan Infra: The company is in the steel manufacturing and EPC business. Kridhan is one of the few EPC companies with a strong balance sheet and a comfortable leverage position. Recent acquisition of a Singaporean EPC firm has given this company a strong foothold in the South East Asian market. At the present price of Rs 87, this stock has a tremendous upside potential with an immediate one year target of Rs 125.
3. Sanghvi Movers: The company is into hiring services for cranes in India. Sanghvi Movers operates heavy lift, plant election and maintenance services at various plants across India. The company is also in the business of generating wind energy. A series of bad results and pessimistic outlook has pushed the stock to a multi-year low of Rs 150. This seems to be a very attractive entry level. The company has been actively ramping up its fleet by importing various categories of cranes. This should help the company expand its operations significantly as and when economic growth picks up momentum. In the wind energy segment too, the company has drawn up ambitious targets of investments and scaling up. Given the potential demand and preference for clean energy, this segment too is likely to contribute majorly in improving the overall performance of the company. With strong traction likely to continue in the wind power generation and the likely revival of capex cycle, the stock is certainly a potential multi-bagger from the current levels.
4. JBM Auto: Electric vehicles is the next big disruption happening in the automobile industry. Over the next perhaps 15 to 20 years, a significant percentage of vehicles on the road will be driven by electric power. One of the early movers in this segment is JBM Auto. The company is into manufacturing electric buses. Moreover they have the capacity and technology to start manufacturing other electric utility and commercial vehicles. All this augurs very well for the future and gives the company a great first mover advantage in electric vehicles. While the rate at which electric vehicles will replace traditional IC engine powered vehicles can be debated, there is no doubt anywhere that the percentage growth in electric vehicles will be phenomenal. JBM Auto is, thus, sitting on a potential volcano of growth potential and the stock presents a great capital creating opportunity.
5. EPC Industries: The company is into setting up micro irrigation systems. Given the strong parentage(M&M), very clear focus on only micro irrigation systems (MIS) and the amazing growth potential in the MIS business, this stock is clearly a great investment idea. Awareness of farmers with regard to MIS has clearly been increasing. The ban imposed in Maharashtra against the company’s products in July 2016 has got lifted recently. With a 3 to 5-year view, this scrip presents a fantastic wealth creation opportunity on the back of the MIS theme.
(The author is CEO, Invest Shoppe India Ltd. Though due care has been exercised by Invest Shoppe while selecting these stocks, investors are advised to consult their financial advisors before making any investment in these stocks.)