Best Multibagger Stocks And Sectors For 2019

Now Buy Best Multibagger Stocks in India For 2019

A Multibagger Stock is the one which can give manifold returns. Here is the list of stocks and sectors which are expected to turn to be multibaggers in the upcoming years.

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Sectors and Stocks That Can Become Multibagger In 2019

The Ideal Approach - To find multibagger stocks starts from finding promising sectors. First step - to find sectors which will have good and sustainable growth from next 8-10 years. Second step - to find most undervalued stocks in the said sector.

Multibagger Stocks For 2019

Textile Sector On An Upswing

The textile sector of India is one of the oldest sectors of the economy. The sector has witnessed a hard time post demonetization and GST transition phases. However, post enough correction in the stocks, sector seems to be much more attractive. With the government's supportive policies and favourable demand scenario, the sector is expected to create many multibaggers. Here are some of the key pointer which could emerge this sector as a gem.

1. The rising domestic demand environment remains one of the key factors for the robust future of the textile sector. The Strong rise in the private consumption expenditure would aid the industry in FY19.

2. An 11% increase in cotton crop production coupled with the rising acreage at 19% is expected to moderate the cotton prices in the upcoming year. In the near terms, the industry has faced cotton pricing hurdles due to pink bollworm issue. The softening of cotton prices would ultimately aid the operating margins.

3. The government of India has raised the basic customs duty from 10 to 20% on almost 500+ textile products. The move is expected to boost Make in India and indigenous production.

4. Textile exports are also expected to see a robust growth in the upcoming years. The rupees depreciation remains the key reason behind the export growth. Moreover, the government's progressive policies to promote exports are expected to bode well ahead.

Stocks to watch - GHCL, Vardhman Textiles

Why GHCL And Vardhman Textiles?

GHCL

1) Key Highlights

GHCLs Q3FY19 revenue grew 21% yoy to Rs8.70bn (Emkay estimate: Rs8.06bn), driven by 11.5% yoy growth in Soda-ash and 42% yoy growth in the Textile segment which was largely driven by capacity expansion and realization improvement in the spinning business. EBITDA stood at Rs2.05bn, up 49% yoy on stable performance in the Soda-Ash segment and the Textile segments turnaround. EBITDA margin expanded 439bps yoy to 23.6%, driven by a price hike in Soda-Ash and better utilization in Textiles. PAT rose 44% yoy to Rs1.02bn. Interest cost stood at Rs272mn, down 21% qoq and 3.4% yoy, while depreciation increased 14% yoy to Rs289mn due to the commissioning of newer capacities. The silver linings during the quarter were the sequential turnaround in Home Textiles EBITDA, stable Soda-ash pricing outlook, and tight soda-ash supply situation globally.
2) Inorganic Chemicals realization and growth outlook remains firm
Inorganic Chemicals business revenue grew 11.5% yoy to Rs5.48bn, driven by better realizations. Volumes were down 1% yoy to 2.30 lakh MT, while overall realization increased 13% yoy and 8% qoq on a price hike. The next round of capacity addition in Soda ash should come at the end of Q4FY19. We expect Soda-ash revenue to grow 10% yoy and 7% yoy in FY20/FY21E.

3) Textiles delivered strong operational performance
Revenue of the Textiles segment increased 42% yoy to Rs3.2bn, led by better performance from the spinning business and the recovery in Home Textiles. The prolonged weakness in the segment seems to be a thing of the past with positive performance in the last three quarters. EBIT margin improved to 7% from -3% in Q3FY18. Management is positive on the Home Textiles business, and we expect positive EBIT performance (vs. negative estimate), with 6%/10% yoy revenue growth in FY20E and FY21E.

4) Outlook remains positive
The Soda-ash business witnessed an uptick in realization along with healthy volume growth outlook on periodic capacity expansion. We expect the benefit of increased realizations to fully percolate in 2HFY19 and FY20E. The tight global supply situation and steady demand in Asia comfort us on the stability in the Soda-Ash realization going forward. Further, the ongoing recovery in the Home Textiles segment is likely to become better, thanks to a decline in cotton prices and weak INR.

Vardhman Textile Ltd

1) Key Highlights
Revenues for the quarter grew 10.6% YoY to Rs. 1685 crore (I-direct estimate: Rs. 1618 crore). Revenues from the textile segment grew 10% YoY to Rs. 1591.8 crore while acrylic fibre reported healthy revenue growth of 28% YoY to Rs. 117.5 crore. Gross margins for the quarter improved 659 bps YoY to 50.8% (Idirect estimate: 48.9%) mainly on account of low cost cotton inventory. Subsequently, EBITDA margins improved 667 bps YoY to 19.6% (I-direct estimate: 17.0%, Q1FY19: 17.2%). Absolute EBITDA grew 67% YoY to Rs. 331 crore (I-direct estimate: | 274.0 crore). On segmental front, EBIT margins for textile and acrylic fibre expanded 570 bps and 620 bps YoY to 17.8% and 11.7%, respectively. Lower other income (down 18% YoY to Rs. 42.1 crore) coupled with high taxation rate (30.6% vs. 19.7% in Q2FY18) stemmed the PAT growth. Resultant PAT grew 47.5% YoY to Rs. 196.4 crore (I-direct estimate: Rs. 146.8 crore).

2) New yarn and fabric capacity to be fully operational in Q2FY20
FY18 was a subdued year for VTL with revenue growth of 3% owing to subdued demand and various regulatory changes like GST negatively impacting revenue growth. We expect revenue growth in FY19 also to remain moderate owing to capacity constraints as the new capacity would come in phases while the revenue impact would only be visible from H2FY20. VTL is focussing on increasing the share of fabrics in the overall revenues and expanding its fabric capacity from 140 million metre to 180 million metre by start of Q2FY20. Also, the company is adding 100,000 spindles, of which ~ 30,000 are expected to commence operation in March 2019 while remaining 70,000 are expected to be operational by June 2019. The management indicated it would incur a capex of | 1400 crore in next two years with 50% to be spent on fabric capex and the remaining for expanding yarn capacity.

3) Outlook and Valuation
FY18 was a tough period for Vardhman due to various issues like high cost cotton inventory and GST related issues, which led to a decline in margins. We expect revenues to grow at a CAGR of 9.1% in FY18-20E to | 7442 crore in FY20E as the expanded capacity is likely to come onstream in Q2FY20. In spite of being in a capital intensive business, Vardhman has continuously maintained debt equity ratio below 1. The focus of the management would be on converting more yarn to fabric, which would lend better stability to EBITDA margin. Factoring in the better margin in Q2FY19 and the management reiterating that EBITDA margin is likely to remain in range of 18-22%, we marginally upgrade FY19E, FY20E earnings estimates.

Paper Industry To Write A Multibagger Page

With the rising domestic demand, the Indian paper industry has become more promising. The industry seems to be underpenetrated in the Indian origin and shows a huge potential for growth. Lets shed some light on the key drivers which can drive this industry to produce multibaggers in the upcoming period.

1. The overall demand for the paper industry is expected to grow at a CAGR of 6-7% in the upcoming year. The anticipated pickup in the education sector, as well as the growing literacy rate, is expected to bode well for printing and writing segment thereby supporting the demand growth.

2. Paper industry is at a sweet-spot with 40% rise in paper prices in the last few months due to capacity shutdown in China due to the ban on import of waste paper by the Chinese government. So packaging paper prices rose by 40% since August 2017 which unlikely benefited Indian paper companies.

3. Growing demand from e-commerce industries is boosting the packaging paper and board segment.

4. The packaging paper segment also serves the need of industries such as FMCG, food & beverage, pharmaceutical, textiles, etc. However, growing urbanization raises the requirement of better packaging quality of FMCG products marketed through organized retail and increasing preference for ready-to-eat foods

Stocks to watch - Orient Papers, JK Paper.

Why Orient Papers And JK Paper?

Orient Paper and Industries Ltd

1) Key Highlights
GHCLs Q3FY19 revenue grew 21% yoy to Rs8.70bn (Emkay estimate: Rs8.06bn), driven by 11.5% yoy growth in Soda-ash and 42% yoy growth in the Textile segment which was largely driven by capacity expansion and realization improvement in the spinning business. EBITDA stood at Rs2.05bn, up 49% yoy on stable performance in the Soda-Ash segment and the Textile segments turnaround. EBITDA margin expanded 439bps yoy to 23.6%, driven by a price hike in Soda-Ash and better utilization in Textiles. PAT rose 44% yoy to Rs1.02bn. Interest cost stood at Rs272mn, down 21% qoq and 3.4% yoy, while depreciation increased 14% yoy to Rs289mn due to the commissioning of newer capacities. The silver linings during the quarter were the sequential turnaround in Home Textiles EBITDA, stable Soda-ash pricing outlook, and tight soda-ash supply situation globally.

2) Largest player in Indian Tissue paper segment due to edge over peers
The Indian tissue paper industry is witnessing a) an improvement in domestic demand on rising disposable income and increasing hygiene awareness, and b) a rise in exports due to benefit to domestic producers following the sharp rise in global pulp prices vis--vis decline in domestic wood prices. Tissue paper exports from India grew by 46% in FY18 and 57% in 2MFY19. OPIL is the largest player in Indias Tissue Paper segment in India and had a 44% share of tissue paper exports in FY18. The company has an edge over its peers due to its established presence in both the domestic & international market on the back of its first mover advantage in India (in 1997) whereas most other major paper manufacturers have not yet entered this segment.

3) Balance sheet to remain highly comfortable, despite implementation of recent capex plan
OPIL has a strong balance sheet position, with gross debt of only INR 69 crore in June18 vs expected CFO of INR 119 crore in FY19. The company has recently announced its plan to enhance pulp capacity from 72.5 ktpa to 100 ktpa to eliminate its reliance on market pulp at a cost of ~INR 75 crore and setting up of new recovery boiler at a cost of ~INR 150 crore. The project is proposed to be completed by September 2020. We believe the balance sheet to remain light in the future as the proposed capex will be funded out of internal accruals and/or divestment of equity stake in Century Textile & Industries Ltd (CTIL). The management has already intended to divest its investment in CTIL in the near-future.

4) OPIL to benefit from timely enhancement in tissue paper capacity in a favourable environment
We believe the company that can add capacity and source pulp from the domestic market stands to gain the most in this favourable environment. While almost all domestic paper manufacturers are operating at full capacity, OPIL stands to gain the most due to the timely enhancement of its tissue paper capacity from 25 ktpa to 50 ktpa in May 2017 and its low dependency on market pulp (<10%) for its current paper manufacturing operations. OPIL plans to increase its pulp capacity from 72,500 MTPA to 100,000 MTPA by Sep 2020, which will completely reduce its reliance on market pulp over the long-term

JK Paper

1) Key Highlights

The company generated a nearly two-fold jump in its standalone net profit to `109.57cr mainly driven by volume growth and sales realization. It had posted a net profit of `56.63cr. Total income rose 17.47% to `795.46cr as against `677.11 cr in the same period previous fiscal. Margin improved further to 26.1% in Q2 (FY18 21%) on the back of improving realizations, reducing raw material costs and improving operating efficiency. During the quarter, JK Paper took possession of the Sirpur Paper Mills and refurbishment and overhaul of plant and machinery is underway. Revenue remained flat on a sequential basis as production was impacted due to plant shutdown in Rayagada, Odisha following a strike by workers.

2) Prominent Paper Industry Outlook

India paper market is calculated to grow with a CAGR of more than 10% in value terms during review period starting from 2011-12 to 2016-17 and the market is anticipated to reach more than Rs.75,000 crores at the end of the forecasted year 2022-23. Paperboard & industrial packaging paper, paper stationery, newspaper print, and specialty paper altogether creates the overall paper market. As the paper industry of India is becoming more competitive by adding improvements of key ports, roads & railways and communication facilities, revision of forest policy is required for wood-based paper industry so that plantation can be raised by industry, cooperatives of farmers and state government.
3) Capacity Expansion to drive volume
As operating at full capacity, the management plans to increase capacity to achieve meaningful volume growth. It announced a brownfield investment of Rs.1,450 crores for setting up additional packaging board capacity of 1.5lakhMT. Though commercialization of new capacity addition is likely to take more than 24-30 months, acquisition of Sirpur Paper Mills is a near term positive. So from 4.5 lakh tons capacity, Sirpur acquisition will make up capacity to 6-lakhs. Therefore, in two years time, capacity will move up from 4.55-lakh to 7.5-lakh tons and will become the number two paper company in the country.
4) Acquisition story:
JK Paper acquired Telangana-based Sirpur Paper Mill at ` 371cr through NCLT insolvency process. This consists of a cash payment of `166cr and issue of equity shares of `43cr and preference shares of `162 cr. Also, would help increase capacity at a total investment of around ` 671 cr, including incremental capex towards modernization. The capex, for both the planned organic and inorganic expansion, would lead to an increase in leverage, especially over FY20-21. However, the staggered nature of the capex, with favorable industry fundamentals, mitigates the risk to some extent.

Outlook
Volume growth, higher realizations coupled with improved operating parameters and abridged finance cost resulted in uptick in profitability for the quarter. Having current capacity at 4.55lakh tones, JK paper is all set to commence the additional capacity of 1.38 lakh tones from Sirpur plant in Telangana, to help venture into the color paper segment, the very first time by April 2019. Likewise, will further increase its capacity by adding 1.5 lakh tonnes in the next two years from Gujarat plant stemmed to focus on the packaging board vertical. Both would help to grow revenues at 15% CAGR over the next 5 years.

How To Find Multibagger Stocks

Let's take the key question head-on--How to find these multibagger stocks? Lets clear one thing before we move forward. You cant find multibagger stocks by searching multibagger stock tips on google. One need to scrutinize the stocks on various parameters. What are these parameters? How you can find multibaggers easily on your own? A simple way is analyzing the business as a whole that is research on every aspect of the business. Want to know how to effectively analyze a business, read our scholarly article on How To Find Multibagger Stocks?

Long Term Perspective Is Only Route For Multibagger Growth

This is the most important part. Having a long term investment perspective increases your chances of experiencing multibagger growth. It's simple, any company doesn't multiply its value overnight (in some cases if it does, it doesn't sustain), hence, it is important to hold your stocks for a considerably long period and give the company plenty of time to march ahead with sustainable growth. One look at Rakesh Jhunjhunwala's portfolio will give you a fair idea of why he has got such stupendous upside in most of his holdings, because of long term investment perspective.

Imagine you have a capital of Rs. 1 Lakh and you invest it in stocks. Six months down the line you get around 25% upside on your invested capital taking the value of your capital to 1 lakh 25 thousand. Getting 25% profit in 6 months is a good deal, I wouldn't blame you if you take that deal. Most of the investors would do the same. But considering the fact that you have bought good stocks, booking profits early may not be a smart thing to do. Those stocks go ahead to become multibaggers and you miss out on 2 things - more profit and regular dividends.

Dont Sweat! Get The Expert Advice

Finding good stocks is a herculean task, let alone finding multibaggers. If you are a working professional, it is virtually impossible to devote so much time in research and analysis. Your best foot forward is to sign up with a stock advisory firm and get informed stock advice from the experts. And most importantly, it will significantly improve your chances of experiencing a multibagger growth.

We at Niveza have a specialized and personalized product for the multibagger returns on investment. The product named p360o DIY Multibagger offers you personalized investment experience. This service comes up with a service guarantee, that is your service is active until you make 25% profit with us. We dont believe in making money until you do. So be assured with your service if you face looses, its our responsibility to win your investments. Moreover, one other unique feature of this service is personalized delivery. This feature offers you the freedom to start our recommendation service. Once your capital ready, we will start recommending you our 360-degree researched stocks. If you wish to know more about our p360o variants or this particular p360 DIY Multibagger service you can reach us at 09637171436

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Niveza Editorial Desk : We are a team of stock market nerds trying to stay ahead of the herd. We spend our grey cells everyday to a pave a smooth road for our clients in the shaky world of stock market. While tracking the mood swings of the market we bring our clients the most rewarding deals.

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