The interest in the stock market is at an all-time high. Mutual Funds are pumping money into the most prominent stocks, on the back of their reputations for multibagger returns. Leading stock market experts say many Indian stocks are overvalued, partly because they are trading at a premium, with investors willing to pay a higher price with the hope that the prices will rise further.
The result? Sensex has remained mostly stagnant, with a negative growth of -2% year to date. Yet, leading market experts remain bullish on specific stocks, mainly on the back of consistent demand, stable economic policy and greater corporate earnings.
Despite the competition and tech disruption in the market, a few underrated gems have the potential to offer multibagger returns, based on the unique solutions they offer, their relative lack of alternatives and the potential for compounding demand. Here are 10 stocks that meet this criteria, based on the company’s fundamentals and the solutions offered.
Vinati Organics
Market cap: ₹ 18,000 crore
Sector: Specialty chemicals
What works for it?
We choose products for its brands, and those brands, in turn, depend on suppliers to sustain the quality in its manufacturing. You’ve probably heard about this company for the first time, but this Mumbai-based company has become a crucial supplier for many products- from perfumes to painkillers to agrochemicals to even construction materials. The company offers 30 specialty chemicals for these diverse use cases, with IBB (Isobutyl Benzene) and ATBS (Acrylamido Tertiary Butyl Sulfonic Acid) being their flagship chemicals. There are few domestic manufacturers to beat here, giving the company stable margins, high export potential and consistent demand for its products.
Deepak Nitrate
Market cap: ₹ 25,000 crore
Sector: Agri chemicals/ Specialty Chemicals
What works for it?
The company has been one of the leading manufacturers for dyes and agrichemicals. Its diversified portfolio helps in sustaining the revenue momentum, even if seasonal demand affects some of its products. The company also benefits from the Aatmanirbhar Bharat initiative, as the government has capped imports of many substitutes from abroad, while chemical companies like Deepak Nitrate enjoy a greater say in the domestic market. Dipak Nitrate enjoys a 80% market share in sodium nitrate, a chemical used in food processing, fertilizers and various industrial uses. Deepak Nitrate has also expanded manufacturing phenol and acetone- important chemicals that were mostly imported earlier.
Concor
Market cap: ₹ 42,500 crores
Sector: Container logistics
What works for it?
The company started with managing railway freight containers, and has grown to become a full fledged freight handling company at ports, airports and even cold storage units. The company has earned itself the Navratna status, and has become a vital cog in India’s logistics network. The company has relatively low debt, and also regularly rewards its investors with multiple dividend payouts every year. With no specific reliance on a particular sector, this company is India’s equivalent to FedEx or UPS.
Lumax Auto Technologies
Market cap: ₹ 8,000 crore
Sector: Auto ancillaries
What works for it?
If you own a vehicle, there’s a high chance your vehicle’s seat, lights or other components have come from this company. Lumax has been expanding its presence in the auto ancillaries segment, through collaborations and acquisitions, in a similar trajectory to Motherson Sumi. Despite concerns about high debt, this company’s deep collaborations with leading automakers will help boost growth, and encourage it to keep paying dividends.
Elecon Engineering
Market cap: ₹ 14,000 crores
Sector: Industrial Machinery/ Power Transmission and Material Handling
What works for it?
This industrial engineering company has been present in the market for long, and has managed to consistently outperform its peers despite the competition. Its customized solutions have helped it gain the trust of leading industrial giants, especially the defence forces. The company can mitigate demand fluctuations with its diversified offerings- including mining, engineering, power, steel and infrastructure segments. With the Goverment’s Make in India push, this company remains an underrated stock pick, even as its double-digit revenue and profit growth remain consistent over the years.
Torrent Pharmaceuticals
Market cap: ₹ 122 crore
Sector: Generic Pharmaceuticals
What works for it?
A consistently growing pharmaceutical company, this one offers a wide variety of branded generic medications convering diabetes, cardiovascular, oncology, gynaecology and othe₹The company has built its reputation for quality and consistency, expanding itself through acquisitions over the yea₹The company has recently become India’s fifth largest pharmaceutical player and it can rise up the pecking order as well- banking on its solid reputation for quality and consistency.
La Opala RG
Market cap: ₹ 2,772 crore
Sector: Glassware
What works for it?
This company dared to challenge China’s dominance in the glassware and crockery sector. It is India’s first manufacturer of opal glassware, and has been ramping up its capacity ever since. The company currently holds a market share of more than 50% in glassware, and its homegrown B2C brands enjoy strong brand recall. This Make in India brand rarely depends on imports, unlike its competitors, which sell mostly imported products. The company experiences strong demand for its exports, which account for approximately 24% of its revenue in selected segments. The company is virtually debt-free and has offered regular dividends for years.
Bharat Dynamics
Market cap: ₹59,808 cr
Sector: Defence
What works for it?
This PSU is responsible for developing almost 85% of the country’s guided missiles, specifically the Agni and Aakash missiles. The company is almost debt-free, and has a consistent order book from the military with export orders as well. The company has given consistent profits and dividends, with regular investments in Research and Development as well. The company has mastered the technology for missile development, in collaboration with the DRDO, and is now looking to expand its tech stack even further. The company remains central to the government’s Aatmanirbhar Bharat initiative.
Cochin Shipyard
Market cap: ₹50,180 cr
Sector: Shipbuilding
What works for it?
Another PSU with a great outlook, Cochin Shipyard is a Miniratna tasked with maintaining, repairing and building ships, both for defence and industrial use. The company has reported strong net profits over the years and boasts of developing the capabilities to build India’s homegrown aircraft carrier- INS Vikrant. Its financials have remained relatively healthy over the years, even as the company is working on fulfilling the ever-ending demand for commercial and defence ships despite competition from South Korean and Chinese shipbuilders.
Zen Technologies Ltd
Market cap: ₹ 14,500 cr
Sector: Defence training
What works for it?
This Hyderabad-based company ventured into a segment no one technology company had ever thought of- and still doesn’t have any serious domestic competitor to think of. Zen Technologies offers the military training simulation solutions for the Indian defence forces that help them prepare for any threat of war. Since its inception in 1993, the company has expanded its offerings- with stimulation solutions for a variety of weapon systems to drone stimulations sytems now. The stock has zoomed more than 2,700% since its IPO got a tepid response in 2004, yet this defence company still remains a rather unknown stock that investors can choose to invest.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Investing in stocks includes financial risks, and past performance is not indicative of future results. Readers should conduct their own research or consult with a qualified financial advisor before making any investment decisions.
