Investors can benefit from cutting-edge businesses and participate in the country’s economic development by purchasing growth stocks.
So what precisely are development stocks?
Companies that are experiencing faster sales and/or profit growth than their rivals are considered growth stocks. They typically take pleasure in an appealing feature that helps them accomplish such a feat, such as a strong brand value or an economic moat.
Therefore, with this in mind, we highlight and investigate five growth stocks with significant long-term gains potential.
#1 Varun Beverages
Varun Beverages, a giant soft drink, comes in first on our list.
Under PepsiCo’s brands and trademarks, Varun Beverages manufactures, sells, and distributes soft drink products. These consist of both: Drinks with and without carbonation.
With licenses from 17 Indian states and two union territories, the company operates on a franchisee model. In addition, there are a few international markets.
Varun Drinks offers start to finish execution abilities going from assembling, circulation and warehousing, client the executives and in-market execution, while PepsiCo offers brand, concentrate and promoting support.
In the past five years, the business has done exceptionally well. Profit increased 748.8% over a 5-year CAGR (compound annual growth rate) while revenue increased 17.4%. Return on Equity (ROE) has increased to a 5-year average of 17.5%.
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The current interest coverage ratio is 3.2x, and the net debt-to-equity ratio of the business has decreased significantly over the past five years, going from 1.5x to 0.82x.
Growth in market share and an increase in the contribution from non-carbonated beverages contributed to this stellar performance. This is probably going to go on in the long haul.
Even though it has been in business for more than three decades, the business is constantly improving its capabilities to meet the high demands of the market. This includes brownfield expansion at six Indian plants and greenfield expansion in the states of Rajasthan and Madhya Pradesh.
Through a variety of customer push strategies in licensed areas, the company intends to drive growth by increasing its market share across all categories.
Advertiser holding is essentially as high as 63.9%.
#2 Bajaj Finance
Bajaj Finance follows on our list.
India’s largest NBFC (non-banking financial company) is Bajaj Finance. The lender asserts two tons of AUM, or assets under management. Retail and consumer/mortgage finance, which make up more than 80% of the AUM, are the primary focus of its portfolio.
Bajaj Finance faces competition from banks and non-bank financial companies (NBFCs) for traditional retail loan products, such as mortgages and personal/consumer loans.
Unlike retail banks, which target high-net-worth individuals, the company focuses on relatively low-income groups in personal financial services.
The company is doing well.
Over the past five years, advances to private lenders have increased by more than 2.4 times. Since FY2018, the company’s net non-performing assets (NPAs) have remained stable between 0.3 and 0.4 percent, which ranks among the lowest in the industry.
This is commendable because it demonstrates that the business has managed to manage risk while expanding.
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The company’s profit has also increased. The five-year CAGR for net profit was 20.1%. The average return on equity (RoE) over the past five years was 18.6%.
At Bajaj Finance, data analytics has been used extensively. In its financing plan, the company uses artificial intelligence. The company has been able to expand while maintaining its credit quality as a result of this.
However, investors and analysts anticipated better quarterly updates from the company, which is why the stock has underperformed the markets over the past few months.
However, this does not diminish the fact that the business remains intact or well-positioned for long-term expansion.
Long-term, Bajaj Finance wants to keep increasing its AUM by 25% while maintaining high return ratios. Microfinance, commercial vehicle loans, and tractor loans are just a few of the emerging verticals that will drive growth.
The promoters control approximately 55% of the company.
#3 Affle India
AFL India is number three on our list.
Affle is a market leader in mobile marketing and advertising technology that provides a variety of digital business solutions. International trade accounts for 70% of total revenue, while domestic trade accounts for 30%.
The business faces competition from global mobile advertising and discovery platform InMobi as well as other industry titans like Google Ads and Facebook Ads in the digital advertising sector.
Multiple acquisitions and increasing mobile penetration in the country have contributed to the company’s success.
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In the past five years, both the revenue and the net profit have increased significantly.
Dividends are not paid out by the business to shareholders. Acquisitions of technology companies and investments in subsidiaries are two common uses of the generated cash.
Long-term shareholder value is also anticipated from the business.
The following period of development originates from extension in the client base. McDonald’s, Apollo, Byju’s, Swiggy, Zee5, and a number of other well-known Indian and international brands now make up the company’s clientele.
He has likewise ventured into computer based intelligence and AI arrangements, being persuaded of the reception of Man-made brainpower in the field of advanced promoting.
In addition, the business has patented a lot of its technology and has accumulated a portfolio of 20 patents in India, the United States, and Singapore, all of which are expected to benefit in the long run.
The advertisers have put well in the business, possessing 59.9% of it.
#4 Dixon Technologies
Dixon Technologies comes in fourth on our list.
Dixon is a multinational company that makes and provides services for electronics. The production of commonly used consumer electronics like televisions, washing machines, smartphones, LED bulbs, battens, downlighters, and CCTV security systems is its core competency.
The company has long-term contracts with some of the most well-known brands, but it has not created its own brand. They have a significant advantage over Samsung, Xiaomi, Panasonic, OnePlus, and Philips.
Over the past five years, the company has done well. While income has developed 3.5x, benefit has significantly increased.
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In spite of extending forcefully in an exceptionally capital-serious industry, Dixon Innovations has tried not to gather obligation on its books. In FY22, the debt-to-equity ratio is 0.3x.
Although the company’s performance in the consumer electronics and lighting industries, as well as slow progress in the mobile market, has hurt it in the past year, it is well-positioned to grow in the long run.
The next step in the company’s expansion is the addition of Middle Eastern customers. In addition, a rise in production-linked incentives (PLIs) from new markets like IT, refrigerators, and wearables could drive significant long-term growth.
The promoters only own 34.1% of the company. However, institutional investors hold a significant portion of the balance, and their stake has increased over the past two years.
#5 Gold BLW Precision
The BLW Precision Forging is the final gold on our list.
One of the most prominent automotive technology businesses in India is Sona BLW. It creates, manufactures, and supplies mission-critical automotive systems and components that are highly engineered.
The organization is among the main ten players in the Differential Angle Stuff market all around the world in view of the absolute volume provided to PVs, CVs and work vehicles.
Sales and net profit have increased by four and five times, respectively, over the past five years, indicating the company’s strong performance. The returns have improved as a result, which reached 18% in FY2022.
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This sensational development has been driven by expanded piece of the pie in the starter engine business and getting long haul orders from clients, particularly in electric vehicles.
The prospects for the business appear promising.
With the support of its research and development team and a robust order book, the business is confident that it can continue to develop new products and serve a larger customer base.
The promotion of PLI is positive for the business and will eventually result in increased margins. Also, the absence of cutthroat force in India and abroad, which make various congregations, will additionally support development.
According to the most recent shareholding pattern, the promoters hold approximately 53.5 percent of the company.
Lastly, many people use the popular strategy of investing in growth stocks to build wealth over time. Growth stocks frequently possess strong fundamentals and high potential for future growth, despite their short-term volatility.
Growth stocks can offer significant returns to investors who intend to hold their investments for the foreseeable future.
But before you do all of that, you should think about a lot of other things, like the company’s financial health, industry trends, and the landscape of competition.
It is important to keep fundamental research in mind despite the positive constraints.
Disclaimer: This article only serves as information. This is certainly not a stock suggestion and ought not be treated in that capacity.
Equitymaster.com syndicates this article.
