Investors are advised to invest in the market when the market is in a correction mode. However, there are some stocks which can give you decent return even if bought at the current level.
Stock markets are currently hovering around their all-time highs and this may not be the right time to dabble in the market, as usually advised by market experts. Investors are advised to invest in the market when the market is in a correction mode and stocks are cheaper. This is to optimise one’s returns. However, there are some good stocks which can be bought anytime, even in this bull run, as one is unlikely to suffer any loss by owing them. Here we are taking a look at 10 such stocks which may give you decent returns over the long term (5 years and above).
1. AARTI Industries Ltd
AARTI Industries Ltd is a global leader in Benzene-based products, with diversified end-users and customer profile. Its major business segment includes speciality chemicals, pharma and home & personal care chemicals. “The outlook of Indian chemicals has improved significantly as global chemical giants are currently de-risking their raw-material sourcing destination from China, due to higher regulatory restriction and to diversify country risk. ARTO’s operational performance is exceptional, with revenue growth of 13% CAGR, EBITDA and PAT growth of 20% & 29% CAGR over FY12-FY17. Better product mix and cost rationalisation have improved EBITDA margins to 20% from 15% during FY12-FY17,” says Vinod Nair, Head of Research at Geojit Financial Services.
2. NBCC Ltd
NBCC Ltd is a Navaratna Enterprise under the Ministry of Urban Development. Its business verticals include project management consultancy (PMC), engineering procurement & construction (EPC) and real estate business. NBCC is at sweet spot considering its huge order book, limited competition and expertise in executing large projects. The current order backlog of Rs 75,000cr (12x FY17 sales) provides strong visibility for the next 5 years. Order inflow guidance of Rs 25,000 cr for FY18E provides a rosy picture. More potential opportunities are in the pipeline from Dharavi, Railway Station Redevelopment and Irrigation Project in Maharashtra. The execution from large redevelopment will improve the revenue growth from H2FY18E. Earnings are expected to grow at a CAGR of 42% over FY17-19E.
3. Bharat Electronics Ltd
Bharat Electronics Ltd is a Navaratna enterprise having 37% market share in Indian Defence Electronics. BEL’s core capabilities are in radar & weapons systems, defence communication & electronic warfare. Order inflow in Q4FY17 grew by 172% YoY. “Current order backlog of Rs 40,000cr is 5.3x FY17 sales, has significantly improved the earnings outlook. FY17 revenue & PAT grew by 15% & 10% YoY respectively driven by strong execution. EBITDA grew by 15% & margins improved by 10bps YoY to 20.5%. Going forward, BEL will emerge as a key beneficiary from the GoI’s indigenization & modernization drive. Given BEL’s strong order pipeline and earnings outlook, we maintain our positive outlook on this stock,” says Nair.
4. UPL Ltd
UPL is a leading global manufacturer of crop protection products. UPL has presence across agri-input value chain from seeds to post-harvest chemicals. UPL’s fully integrated business (across agri-value chain) and diversified revenue (across product categories & geographies) led to a ~17% revenue CAGR over FY12-17. “Continued new product launches (4 planned in FY18) and recovery in global commodity prices will support its revenue growth going forward. Backed by rising innovation rate, we project EBITDA margin to hover in the range of 20.3%-20.8% during FY18-19. We expect EBITDA/PAT to grow at a strong CAGR of 17.4/13.7% over FY17-19, led by backward integration & shift in product mix towards biologics. Given continuous improvement in global market share of UPL, we have a Buy rating on the stock,” says Nair.
Ujjivan’s transformation to a small finance bank will script a new growth in the coming years through larger ticket-size loans, new products and deposit mobilization. Ujjivan’s branches are geographically spread across the country with stronghold in rural and unbanked markets. Ujjivan has grown its client base at an aggressive 28% CAGR over FY12-17 and has maintained high customer retention ratio of 86% over the last three years. We factor a healthy 24% CAGR in the loan book over FY17-19E. Headwinds during transition to SFB could impact earnings in the medium term, while long-term growth visibility from a full-fledged SFB is supporting the premium valuations.
6. RBL Bank
RBL Bank has been among the fastest-growing private sector banks in the past 4 years with advances and deposits CAGR of 47% and 43%, respectively, backed by both organic as well as inorganic business expansion strategies. Efficient risk management system has helped to manage asset quality leading to comfortable gross NPA of 1.5%. “The bank is increasingly focusing on the lucrative retail segment instead of focusing on just corporates and SMEs. Further, the bank has invested significantly in technology, network, human capital and risk management over the past six years. We expect RBL Bank will retain the tag of ‘one of the fastest growing banks’ over FY17-19E without compromising on asset quality,” informs Nair.
Ultratech has completed the acquisition of Jaiprakash Associates’ assets in Q1FY18 and overall capacity has increased by 21.2 MT to 93 MT. The focus now is to improve the operational efficiency and utilisation level of the acquired assets to 60% over the next one year and 70% by FY19. The acquisition may be earnings dilutive in the short run. However, the volumes are expected to grow at 19% CAGR over FY17-19E, led by steady ramp up of Jaypee assets with a pickup in demand from housing and infrastructure sectors and factor healthy 150bps YoY increase in margin in FY19E.
8. Bajaj Finance
Bajaj Finance has delivered healthy operating performance with steady asset quality over the last few years with gross NPA ratio at 1.7%, one of the best asset quality among its peer group. BFL’s assets under management (AUM) continued to grow at a strong pace of 39% YoY driven by traction in the consumer and rural businesses. Going ahead, AUM is expected to grow at 34% CAGR over FY17-19E, led by the consumer financing segment (43% CAGR). “We believe that BFL is relatively well positioned in the NBFC space given its well-diversified product portfolio, lower individual product market shares and strong risk management practices. Multiple operational levers coupled with new avenues of growth will continue to drive strong performance going ahead,” says Nair.
9. Ashok Leyland
Ashok Leyland (AL) is the second largest commercial vehicle manufacturer in India and has a strong presence in the M&HCV (Heavy Commercial Vehicle) segment with a market share of ~34.0% as on FY17. In Q1FY18, AL’s revenue de-grew on the back change in emission norms and GST. We believe a strong bounce back by beginning of H2FY18 due to newly-launched BS-IV iEGR technology-based vehicles and increase in the warranty period to 48 months. Moreover, AL continues to increase its market share by expanding its distribution network and increasing its global footprints to offset the cyclical nature of the domestic M&HCV sector. Its high order book from African countries and new launches in LCV are expected to drive sales and we expect revenue to grow at 11% CAGR over FY17-19E.
10. Bharat Forge
Bharat Forge Ltd (BFL) is a leading player in the forgings industry. The long-term growth outlook for BFL remains robust on the backdrop of improved revenue visibility. BFL’s order from Boeing for developing and manufacturing 777x titanium forgings will start reflecting in its revenue from FY19E. “We expect 15% revenue CAGR over FY17-19E, led by a pick-up in the domestic CV market by H2FY18 and de-risking the utilization in the non-auto sector. We believe BFL has shown resilient in margin despite a decline in the high-profitable non-auto business and global CV export is commendable. The company’s continuous cost rationalisation and positive automotive demand and ramp up of passenger vehicle business will add colour to the margin,” says Nair.
(Disclaimer: These stock recommendations have been made by Geojit Financial Services. Although due care has been taken while making these recommendations, investors are advised to also consult their financial advisors before investing in any stock based on these recommendations.)