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Stocks
Outstanding show
Small caps dominate the list of companies to have grown
their profit year after year for the past five years
Sentiments drive the stock market. It discounts every bit of information, including
economics and politics, domestic or international. Investors from all walks of life
absorb the news, draw their conclusions,
and trade accordingly. For novices, the
functioning of the market may appear absurd and irrational and the volatility could
be frightening.
Though the stock market moves on sentiments in the short term, it is far more sensible and rational in the medium to long term.
Indeed, the market knows better and it is
known to discount future well in advance.
The market rewards quality stocks
over medium to long term. It is conscious
about superior corporate governance
norms followed by companies. Companies with resilient business models and
strengths developed over the years are respected. Those with strong brands, distribution network, technology and expertise get premium discounting.
Over the last two decades, at different
points in time, the stock market has seen
unprecedented rallies in specific sectors such
as financial services, cement, pharmaceuticals, information technology, and media. The
surge took stocks belonging to these industries to abnormally high valuations. How-
18
change in profit was determined. The median is the middle in a list of sorted numbers. The median is better over average as
the average can be influenced by extreme
values and can provide misleading picture.
After calculating the median value of
growth in profit over the last fives years,
companies to have outperformed the set of
companies in each financial year over the
last five years were selected. Thus, at the
end, 34 companies emerged (see table: Superior profit).
Of these, 14 are from the small-cap category, 11 from the mid-cap space, and the
balance nine are large caps. Small caps have
market value of less than Rs 1000 crore, mid
caps between Rs 1000 crore and Rs 10000
crore, and large caps above Rs 10000 crore.
Firms from verticals such as banking and
non-banking financial services (NBFCs)
dominate the list of outperformers. There
are eight NBFCs involved in business activities such as housing finance, investment,
general finance, term lending, and so on. The
four banks featuring in this include ING
Vysya Bank, IndusInd Bank, Axis Bank, and
HDFC Bank.
As a large number of companies that have
emerged after applying various selection criteria are from the small-cap category, investors can rely on additional filters to pick
strong stocks from these outperfomers. For
instance, history of payment of dividend to
ensure that profit is real. Except for one company, all the remaining 33 selected companies have paid dividend in the latest financial year. Solar Industries India, a mid-sized
firm with market cap of Rs 1711 crore, has
InFocus
not paid dividend in the latest financial year.
However, it has paid dividend in the earlier
five years.
There are some interesting companies
among these outperformers. IndusInd Bank
is one such firm. The stock has delivered
consistent growth in the bottom line over
the lat six years. Profit grew 32.2% in the
fiscal ended March 2013 (FY 2013) compared with 39% in FY 2012, 64.8% in FY
2011 and 136.2% in FY 2010.
Compared with profit of Rs 75.1 crore
in FY 2008, IndusInd Bank reported a bottom line of Rs 1061.2 crore in FY 2013,
jump of over 14 times. Earlier in FY 2006
and FY 2005, it was in red. Over the last six
years, that is since June 2007, the stock has
appreciated over nine times. The company
witnessed re-rating since Romesh Sobti
joined the bank as Managing Director and
CEO in February 2008.
Of these 34 firms, 16 have achieved yearon-year growth in profit over the last one
decade. These include Muthoot Capital Services, Intec Capital, Manjushree
Technopack, Supreme Infrastructure,
Vivimed Labs, Dhanuka Agritech, Ajanta
Pharma, TTK Prestige, Gruh Finance, Supreme Industries, Shriram City Union Finance, Mahindra & Mahindra Financial Services, Godrej Consumer Products, Adani
Ports & Special Economic Zone, Axis Bank,
and HDFC Bank.
Apollo Hospitals Enterprise has
achieved extraordinary balance of business
and bottomline growth. The company has
opted for organic expansion over the years.
From owned bed strength of 1,500 end FY
2000, its total bed strength touched 8,420
end FY 2013. This includes 6,382 owned
beds and 2,038 managed beds. This entitles growth of 5.6 times over the last 13
years. Considering the fact that India is an
under-penetrated healthcare market, with
per capita expenditure of Rs 6200 as
against Chinas Rs 17350 and Brazils Rs
46050, Apollo could continue to add capacities in coming years.
Three companies Kwality Dairy (India), Vivimed Labs and Rural Electrification
Corporation reported their 52-week lows
in June 2013. TTK Prestige is another stock
to have reported yearly low in April 2013.
As against this, a higher numbers of firms
are trading close to their 52-week highs including Manjushree Technopack, Dhanuka
Agritech, Kajaria Ceramics, ING Vysya Bank,
Intec Capital, Supreme Industries, TCPL
19
InFocus
Superior performance
Companies to have outperformed the median value of growth in profit in each financial year over the last five years
COMPANY
CMP
(Rs)
MARKET
CAP
(Rs Cr)
52-WEEK
EQUITY DEBT-EQUITY ROCE RONW
CHG IN CHG IN
HIGH
LOW DIVIDEND
RATIO LATEST LATEST TTM SALES TTM PAT
(Rs)
(Rs) LATEST (%)
LATEST
(%)
(%)
(%)
(%)
P/E DY (%)
149.8
30999
175
105.2
50
2.28
10.4
23.6
45
47.3 19.1
0.6
876
2053.3
1014.9
342
125
0.5
38.1
32.2
39.4
52.1 20.3
0.7
1038.6
14448.3
1096.2
605.3
80
0.4
12.4
9.5
18.5
33.8 46.7
0.4
# Axis Bank
1323.1
62031.2
1549
926.9
180
18.7
23.6
22.1
12
1.4
# Bajaj Finance
1376.4
6851.7
1591.2
850
150
4.33
14.5
21.9
46.5
45.5 11.6
1.1
47
71
97.9
24
20
0.3
34.4
29.1
16.2
131.2
656
140.6
88.6
110
0.34
29.3
29.7
10
96
4.7
4.3
12.8 10.2
1.7
40
60.8
50.5
37.5
12
1.18
20.2
29.7
12.9
815.9
27765.1
936
558.2
475
0.84
19.7
25.7
31.7
# GRUH Finance
227.9
4087.6
249.7
141.4
125
9.97
12.4
33.3
24.6
21.2
28
1.1
# HDFC Bank
668.5 159647.8
727
542.5
275
20.5
25.9
30.2 23.7
0.8
0.6
# Godrej Consumer
16.5
2.5
9.5 34.9
0.6
# IndusInd Bank
466.3
24396.5
530.6
308
30
17.8
30.3
32.2
603.8
9463.4
667
339
55
14.6
26.1
34.3 15.4
0.9
94
126.5
104
48.1
4.12
19
14.5
44
39.1
0.6
238.3
1753.5
261.4
161
150
0.88
31.6
31.8
22.8
29.2 16.8
1.3
24.1
488.7
48
23.8
10
4.01
23.4
67.9
62.5
71.8
0.4
Intec Capital
# Kajaria Ceramics
Kwality Dairy
# M&M Financial Services
23
9.6
4.1
259.9
14779
287.5
127.7
180
4.43
14.1
23.8
41.7
44.1 15.9
1.4
Manjushree Technopack
115.9
157
117.4
75
10
1.3
19.9
22.5
16.6
17.8
6.5
0.9
Mayur Uniquoters
434.9
471
505.1
265.1
135
0.08
64.5
45.4
18.8
30.7 10.8
1.6
88
109.7
138.9
61.1
35
3.04
18.5
26.8
57.3
40.2
10.1
248.2
15.2
7.2
3.98
6.2
13.3
14.7
18.9
3.9
35.5
5.2
3.7
19798.6
267.5
178.1
75
5.79
10.9
20.6
29.5
SE Investments
389.9
1581.2
469
313
10
1.23
17.8
19.5
7.3
9.1 22.3
0.3
999.5
5539.2
1230
615.1
65
5.76
14
23
50.7
31.3 12.3
0.6
Solar Industries
14.9 14.5
929.4
1682.2
1099
749
0.58
28.2
28.4
15.8
Suprajit Engineering
34
408
39
21.8
65
0.66
34.2
35.2
8.9
^ Supreme Industries
337.6
4289.2
377
215
300
0.7
38
37.4
199.8
334.4
324
174
12.5
3.28
17.2
24.9
69.1
60.1
81.3
39.6
26.55
1.92
16.5
18.6
Supreme Infrastructure
# TCPL Packaging
Titan Industries
# TTK Prestige
Vinati Organics
Vivimed Labs
Zydus Wellness
18.3
8.7
1.9
17.8
33.6 15.5
1.8
31.9
19.4
3.1
0.6
31.7
75.5
4.4
3.8
224.3
19913.4
313.6
200
175
0.03
65.7
48.2
14.2
20.8 27.5
0.8
3165.6
3589.8
3996
2870
175
0.29
45.7
39.4
23.1
17.4
27
0.6
102.1
503.6
180
91.4
100
0.75
31.3
33.2
22.5
25.3
7.3
259
415.9
403.7
254.1
20
1.32
13.6
23
65.9
32.3
638.8
2495.6
748.7
385
50
49.8
41.6
15.8
43.5 25.7
0.8
CMP (current market price) is closing as on 28 June 2013. DY (dividend yield) is based on dividend paid in the latest financial year. Debt-to-equity ratio is for the latest financial year. P/E (price to earning) is based on
latest trailing 12 months (TTM). Financial year # ending March 2013 ending March 2012 ^ June 2012 * December 2012. TTM period ended March 2013, except for Kwality Dairy it is ending December 2012.
Change in TTM net sales and net profit is over the previous corresponding period.
Source: Capitaline Corporate Databases
On the other side, there are few zerodebt or near-zero-debt companies as well
including Zydus Wellness, Titan, and
Mayur Uniquote.
Conclusion
Past performance is no guarantee that these
companies would continue to deliver in future as well. However, the 34 companies
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