How Multibaggers are Created?
If you are a new investor, we recommend you go through this table below. This will help you understand the Multibagger Creation Journey.
| Year | Description | Returns |
|
Starting Year |
Here you Identified a Multibagger based on Past Performance & Growth aspects.
For example, The capitalization is 300 Crore & PE is just 5. Imagine you Invested 1 Lakh Rupees on it. |
0% on 1 Lakh |
| After Year 1 | The company performed well as expected and displayed 20% EPS Growth.
Now PE is 4. But all EPS growth will not be reflected in Price, especially in the beginning years. Hence you will get +/- 20% returns. |
+/- 20% |
| After Year 2 | Now the company performed well again with another 20% EPS Growth.
This time the price will have to start reflecting as more & more analysts, people, funds will be looking into the stock. Let us say the price gained 50%. The PE is 5 again. |
+ 20% | 1.5 Lakh |
| After Year 3 | Your company is performing well with another 20% EPS growth.
This time the market visibility is high & hence the price jumped another 100% Now the PE is around 8 with Capitalization 600 Crore. |
+ 100% | 3 Lakh |
| After Year 5 | Now you are on Year 5. The compounded EPS growth of 20% lead to 100% EPS growth in 5 years.
Since the Capitalization is above 1000 Crore, Mutual Funds will start Investing. Big Money & Increased Visibility leading to Higher PE. Now the PE is 20 with Capitalization 1200 Crore. |
+100% | 5 Lakh
5X Gain in 5 Years Now onward 20% EPS growth leads to 30% price growth. Also, you will earn 100% return on original capital. i.e 1 Lakh gain every year. |
| After Year 10 | Now the company is growing again at 20% CAGR.
Now the PE is 30. |
+500% | 30 Lakh
At this point you will start getting Dividend Yield 1% as 30 Thousand rs. per year. 30X Gain in 10 Years Wealth Creation! |
| After Year 20 | If you are lucky to have a Superbagger with 20% CAGR. Eg: Infosys, Wipro, Page Industries etc.
Now the PE is 40 and you have a 100X returns on original capital. All these are possible as, Infosys gave 300X returns in 20 years! |
+3000% | 10 Crores
Now the Dividend Yield will be 1 Lakh rs. per month equal to your Original Capital investment. 100X Gain in 5 Years Cash Flow Generation! |
This is how Stock Market creates wealth & cash flow. It takes really long time for the compounding to work. No shortcuts!
So here are the problems of amateur investors:
- They add more stocks than above learning & tracking capacity
- They exit stocks every other year breaking the power of compounding positioning
SO I recommend each & every investor to understand this process & continue holding stocks long term discarding noises, as long as their fundamentals & growth factors are intact. Be like Pro!
Atul Auto – Multibagger Analysis
Atul Auto Ltd.
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NSE Code |
ATULAUTO.NS |
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BSE Code |
531795 |
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URL |
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CMP |
335.00 |
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Free Report |
Yes |
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Publish Date |
Apr-13-2019 |
In this post I would like to Explore the Multibagger Potential of the company. This is based on a blog reader request.
Introduction
The company based in Gujarat founded in 1980s is into the business of Vehicle Manufacturing primarily in the 3-wheeler targeting Cargo & Passenger segments. Company maintains No.1 position in the Diesel 3-wheeler segment in Gujarat.
Earlier in 1970s, the company started with invention of ‘Chakkada’ which was a big success. The current CEO inherited the business from his father & currently have PAN India presence with 330+ primary & secondary networks of distribution centers across India.
The company also have Petrol/CNG variants with Overseas presence. The company has 850+ employees and 60000 production capacity.
CEO
The company CEO is Mr. Jayantibhai J Chandra. He performed previously as Managing Director of Khushbu Auto Finance Ltd. another subsidiary.
Positive Factors
Following are the Positive Factors identified:
Company has a Good Research Team. The company produces 3-wheeler in all Fuel range Petrol, Diesel, CNG, LPG and Electric. Electric Vehicles R&D on Card to accommodate Future trends.
Good Array of Products visible while ATUL Shakti is the new in array covering Passenger & Delivery segments.
FY18 had Sales Growth of 24% and Export growth of 40%. India three-wheeler market is projected to exhibit a CAGR of more than 15% by 20235.
Company does not have any Debt problems as it maintains Debt as Zero & Current Ratio above 1.8. CRISIL has reaffirmed rating as CRISIL “A” with stable outlook. HDFC Small cap & ADITYA BIRLA Mutual Funds are Invested.
Company has invested into the Green Vehicles Variant to curb the Vehicle Pollution issues. It owns a Subsidiary Atul Green Automotive to accommodate this Green Variants.
New plant in Bavla near Ahmedabad which supports Future Expansion aspirations.
Urbanization, India Growth Story, Green & Electrical Vehicle usage will be Boost to the company in coming years.
Concern Factors
Following are the Concern Factors identified:
Demonetization & GST has impacted the Sales of the company. Any such reforms in the future will Negatively affect the company.
The past FY 2015 seems to have the higher number of sales. The direct Competitor Bajaj Auto although seems to have higher sales in FY2018 too.
Cash Flow seems to be not steady. FY2017 seems to have provided the highest cash flow. Current year Net Cash Flow is negative due to Capex expenditure.
Few misalignments with Industry Growth also visible. In few years the company growth was lower than the industry growth. (In high growth companies this will be the opposite)
Crude Oil Price increase can adversely affect the company sales.
Management seems to be Immune to Debts. This affects the Leveraged growth & expansion of the company. The sluggish growth rate of 10% may be due to these factors.
Major competitor is Bajaj Auto which dominates the 3-wheeler industry. Other Competitors are Piaggio & Mahindra. The Penetration & Network of Atul Auto needs to be multifold increased for growing above these niches.
Sales & Profit Growth
Sales & Profit Growth is visible for the current year.
Warren Buffet, Value & Growth Checklist
Following are the Checklist parameters:
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History of Consistently Increasing Sales, Earnings & Cash Flow |
Yes. However the Rate of Growth is Not too Impressive. |
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Durable Competitive Advantage |
Moderate. (compared with competitors) |
 |
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Future Growth Drivers / Sectoral Growth |
Yes. 15% CAGR Sector Growth forecasted for next 5 years. |
 |
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Conservative Debt (long term debt < 3 Net Profit) |
Debt is 0. |
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Debt Equity Ratio, Current Ratio |
DER is 0. CR is 1.8. Both are Very Good. |
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Return on Equity must be Above Average |
22% |
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Low CAPEX required to maintain current operations |
Not. |
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Inventory Turnover Ratio, Debtor Days, ROCE |
All 3 are decreasing for current 2 years but within range. |
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Management is holding / buying the stock |
No changes. |
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Price is Under Valued (< intrinsic value), PEG Ratio |
PEG is high. |
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Stock Price is consolidating (now) |
Yes. |
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Stock Price is growing in past years along with EPS growth |
Yes. |
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Consolidated PE, PB Ratio |
2015 holds the highest price value. |
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Cash Flow Positive, Net Profit % greater than 8% |
Yes. |
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Paying Dividends, Tax |
Yes. |
 |
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EPS Growth Rate |
Yes. |
 |
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Jump in Trailing Result EPS |
Yes. |
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Jump in Quarterly Result EPS |
Yes. 50% |
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Expected Gain in 5 Years |
300%. (Not impressive expectation) |
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Price Movement Graph, 52 Week High & Low |
Okay. |
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Volume Analysis |
Low Volume. Good if Growth manifests. |
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Power of Brand |
Moderate Brand compared with Big Peers. |
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Corporate Governance, Reputation of Leaders |
Yes. |
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Fraud reported |
Not in current search. |
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Summary
Based on the above analysis I would like to say that the company possess Multibagger properties but not in a Great Order. Hence be cautious about Investing in it.
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www.futurecaps.com |
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Value |
Research. Affordable. |
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SEBI Registration |
INH200006956 |
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Disclosure |
Adviser do not hold above stock |
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Disclaimer Futurecaps is an independent equity research team. Use of the information herein is at Investor’s own risk. This is not an offer to sell or solicitation to buy any securities and Futurecaps will not be liable for any losses incurred for the investment based on the advice. The Investor is advised to do due diligence in the scrip mentioned. None of Futurecaps Advisors hold 1% above Holdings of this company. |
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Meghmani Organics – Multibagger Analysis
In this post I would like to provide Multibagger Analysis on Meghmani Organics Ltd (BSE 532865, NSE MEGH.NS).
Note This is part of our Free-multibagger Analysis which will not have any tracking & updates. I would recommend you buying our serious list of Paid-multibaggers subscription plan here.
Meghmani Organics
Founded in 1986, Meghmani Organics is a leading manufacturer of pigments, agrochemicals and basic chemicals. The company has show tremendous record of growth & expansion.
Mr. Ankit Patel is the current Chief Executive Officer.
Website: http://www.meghmani.com/
CMP: 60.00
Growth Aspects
Company enjoys 14% share of Copper Phthalocyanine market. Being an Exporter it enjoyed Revenue Increase through the US Dollar – Indian Rupee Depreciation.
Accelerated by Chemical regulation in China.
Company have 5 subsidiaries.
Global Pigments market to be growtn 4.1% CAGR and reach $27 billion by 2023. This will give immense potential to the commpany coupled with the large capex plan initiated last year.
Sales Growth
Profit Growth
Risks low awareness in indian farmers, global competition, forex variations, global standards variation, corporate governance, chines de-regulation on chemicals.
Warren Buffett Checklist
| History of Consistently Increasing Sales, Earnings & Cash Flow | Yes.
Recent Year, Revenue Growth 49%, PAT Growth 95% New Plant commissioning on the way. |
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| Durable Competitive Advantage | Moderate. |  |
| Future Growth Drivers | Moderate.
Sector outlook is Good. |
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| Conservative Debt (long term debt < 3 Net Profit) | Not. | |
| Debt Equity Ratio, Current Ratio | 0.44, 2.31 | |
| Return on Equity must be Above Average | 21% | |
| Low CAPEX required to maintain current operations | Moderate | |
| Management is holding / buying the stock | 48%. Increasing. | |
| Price is Under Valued (< intrinsic value) | Yes. | |
| Stock Price is consolidating (now) | Yes. | |
| Stock Price is growing in past years along with EPS growth | Yes. | |
Additional Futurecaps Checklist
| Consolidated PE, PB Ratio | PE 6, PB 2 | |
| Cash Flow Positive, Net Profit % greater than 8% | Yes. Yes. | |
| Paying Dividends, Tax | Dividends: No, Tax: Yes | |
| EPS Growth Rate | 50%. Very Aggressive | |
| Jump in Trailing Result EPS | Yes. | |
| Jump in Quarterly Result EPS | Yes. | |
| Expected Gain in 5 Years | 5-10 Times | |
| Price Movement Graph, 52 Week High & Low | 30/6 | |
| Volume Analysis | 6 lakh (High) | |
| Power of Brand | Moderate. | |
| Corporate Governance, Reputation of Leaders | Few issues on MFL promoter stake sale exists. | |
| Fraud reported | Yes. Duty Evasion Arrest. link |  |
| Celebrity Investors | Yes | |
Declaration
Definitely the company possess Multibagger properties at the current price. But, be cautious about the Management alerts.
Note
This is part of Free Multibaggers plan which do not include Tracking & Updates. I would encourage serious investors to buy our Paid Subscription plan.
Disclaimer Futurecaps is an independent equity research team. Use of the information herein is at Investor’s own risk. This is not an offer to sell or solicitation to buy any securities and Futurecaps will not be liable for any losses incurred for the investment based on the advice. The Investor is advised to do due diligence in the scrip mentioned. None of Futurecaps Advisors hold 1% above Holdings of this company.
Wonderla Holidays – Multibagger Analysis
In this post I would like to provide Analysis on Wonderla Holidays. The company was listed almost 5 years back & still trading at approximated price after Inflation.
Wonderla Holidays
CMP: 300.00
Website: https://www.wonderla.com/
Wonderla Holidays Limited operates three largest amusement parks in Kochi, Bangalore and Hyderabad; and the Wonderla resort in Bangalore under the brand name Wonderla.
Promoted by Kochouseph Chittilappilly (of V-Guard) link
It is a Sad Truth that the Investors did not got the V-Guard kind of Appreciation from this stock, which they expected a lot. There can be multiple factors into it like IPO-overpricing, Growth-perspective, Asset-intensive operations, GST-issues etc.
However, due to the Promoter Reputations on High Quality, Corporate Governance, Humanity aspects, the stock has attracted high profile investors like NR Narayana Murthy.
So let us look into the business & value parameters to determine any multibagger potentials.
Business Evaluation
The company generates income from the 3 main parks in kochi, bangalore & hyderabad. Interestingly, the food business constitutes 39% of the revenue.
Positive Factors
Company is expanding to Chennai. plus, adding more rides, in-house manufacturing & improving efficiencies to existing parks. All together these will ensure 150-20% revenue growth in coming years.
Company also have advantage of surplus land which ensures further expansion in coming 10 years. Low Utilization would be a parameter to evaluate.
GST impacted current year Sales, but the latest quarters are improving.
Company has Low Debts which is good in one sense & bad in another view that Leveraged Growth is not there.
Company is adding RFID, No-Queue solutions in the Technical Arena to increase the Footfalls.
No Pledging of shares.
Problem Areas
Considered as Holiday Tiger – Revenue goes double during June quarter there by increasing NPA / Idle resources during other periods. Scope of Corporate Outing, Official Programmes rendering during Weekdays would increase the ROE.
High PE is one problem with this stock.
High PEG ratio is a derived problem.
Low ROE.
Limited Lows
One advantage I can see is that the Promoters are buying back Wondera stocks due to the bear market so one can expect the lows are limited.
Warren Buffett Checklist
| History of Consistently Increasing Sales, Earnings & Cash Flow | Yes.
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| Durable Competitive Advantage | Moderate. |  |
| Future Growth Drivers | Moderate. | |
| Conservative Debt (long term debt < 3 Net Profit) | Not. | |
| Debt Equity Ratio, Current Ratio | DER is Zero, Current Ratio is Average | |
| Return on Equity must be Above Average | No. |  |
| Low CAPEX required to maintain current operations | Moderate | |
| Management is holding / buying the stock | Yes. | |
| Price is Under Valued (< intrinsic value) | No. | |
| Stock Price is consolidating (now) | Yes. | |
| Stock Price is growing in past years along with EPS growth | Yes. | |
Additional Futurecaps Checklist
| Consolidated PE, PB Ratio | PE is high, PB is okay | |
| Cash Flow Positive, Net Profit % greater than 8% | Yes. Yes. | |
| Paying Dividends, Tax | Yes, Yes | |
| EPS Growth Rate | Okay. | |
| Jump in Trailing Result EPS | Yes. But moderate. | |
| Jump in Quarterly Result EPS | Yes. But moderate. |  |
| Expected Gain in 5 Years | 2-3X | |
| Price Movement Graph, 52 Week High & Low | Okay | |
| Volume Analysis | Okay. | |
| Power of Brand | Good. | |
| Corporate Governance, Reputation of Leaders | Okay. | |
| Fraud reported | No. | |
| Celebrity Investors | Yes | |
Summary
Based on the analysis, I would declare that the Stock definitely has Multibagger properties with expected 2-3X returns in next 5 years.
Note
Free Multibaggers are those with No Tracking & Updates.
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You are encouraged to use our Paid Subscription here.
What we can learn from Opto Circuits?
The investors of Opto Circuits are FRENZY!
The stock crashed from Rs. 180.00 to Rs. 50.00. We receive emails on Futurecaps view about the company.
About Company: Opto Circuits (India) is a multinational medical device company. It designs, develops, manufactures, markets and distributes a range of medical products that are used by healthcare establishments in more than 150 countries. The company specialises in vital signs monitoring, emergency cardiac care, vascular treatments and sensing technologies.
Web: http://www.optocircuits.com/
Futurecaps on the Stock
First of all, we did not recommended it, because it was Over-Priced at the time! But in the positive way.. In 2010 it was a very good company, very good growth records, good technology, great recognitions including Forbes Magazine.
You can see here the analyst who recommended it is facing questions:
He is a very good analyst, I would say the investor is Amateur, He approached Stock Market in a wrong way!
See how people react with prices:
Best Way to Approach Stock Market
Gone are the times where Business Owners have sleepless nights, today they have Hedging!
Gone are the times where Investors have bad surprises, today they have Diversifications!
Gone are the days where Investors blame the bear market, they are Opportunities!
From the day 1 of Futurecaps, we have been iterating the following
- Place only 25% of your savings in stock market
- Place at least 10 companies in the stock market investments
- Take an investment period of 10-20 years
- Stocks do not have fixed price, only situational price
- Bear market are the time where you get prices at the lowest
We should always ready to bear the Opposite Side of Investing >> When Stock Price reaches 0.
So how to apply these knowledge:
If you would have used 10 companies in your portfolio, then need not worry about Opto Circuits. After all, worrying at this level is of no use as the price fall almost 70% from 52 week high.
The good thing is that you are Cool with your Portfolio if you have 10 stocks in it:
- As you will have 1 or 2 troubled companies during market good times
- During market times you have all companies troubled, but it investing time as a whole
Based on our evaluations on the company, it is a Bargain Buy now, honestly 🙂
| History of Consistently Increasing Sales, Earnings & Cash Flow |  |
 |
| Durable Competitive Advantage | Company is a solid player in the technology enabled medical equipment market. |  |
| Future Growth Drivers | We expect the medical equipment business to progress in future too. | |
| Conservative Debt (long term debt < 3 Net Profit) | Current Liabilities around 500 crores & Contingent Liabilities around 700 crores. Both are less than 3 times of Net Profit (500 crores) | |
| Return on Equity must be Above Average | ROE is 37% (which is exceptionally good) | |
| Low CAPEX required to maintain current operations | Working Capital problem exists as per study. |  |
| Management is holding / buying the stock | Management wanted to buy the stock, instead they will prefer to use the money in paying of debts by US subsidiaries. | |
| Price is Under Valued (< intrinsic value) | Very True, Intrinsic Value falls around Rs. 550 based on current EPS & Growth. Plus the PE is just 2, with price quoting below book value. | |
| Stock Price is consolidating | Not consolidating, more chance to go down. | |
Problems Summary
Following are the problems faced by company:
- Working Capital Issue
- Cash Flow is Negative
- Credit Rating in Trouble
- Debt due to Foreign Subsidiaries
Solution Measures
The company is taking solution measures like:
- Appointing new CFO Krishna Sudheendra who was CFO in Bangalore International Airport.
- Appointing Usha Ramnani (w/o CEO) as Managing Director of US Subsidiary Opto Cardiac.
- Allocating money through new debt instruments
These measures should ease the problems giving a long term view.
Summary
Based on the current evaluations, discarding the current problems, we believe it is having Multibagger properties. If the company resolves current problems, then in 5-10 year it could reach Rs. 500 through profits & growth. In this view it provides a 10x MULTIBAGGER opportunity.
Recommended prices of investing are around 50.
Next installment around 30.
Warning: Be cautious with news & alerts on company. Do not invest more than 5% of your portfolio. Minimize risks using Guard Bands!
