Despite continuous hurdles like increased interest rates, geopolitical worries, fluctuations in crude oil prices, and continued inflation, the frontline equity benchmarks such as Nifty 50 and Sensex are poised to close 2023 with strong gains. Global analysts expect that, with record-high markets, investors are required to target factors including global and domestic cues, the US Federal Reserve take on interest rates, inflation, elections, and interim budget 2024 for upcoming few weeks. Therefore, investors are now focusing on stocks likely to deliver double digit returns so that they can beat inflation in the long-term.
When 2023 kickstarted, Indian equities started the year on a muted note and the markets were in a downtrend for 1Q. However, the market saw solid rally from the beginning of April. Nifty 50 touched new heights with YTD returns of more than ~18%, while mid and small-caps surpassing 40% and 50% returns, respectively. Hence, stocks likely to deliver double digit returns should on the priority list for the investors. Over the previous one year, top 10 small-cap gainers touched a double-digit increase in their stock prices and increased between 150%-350% YTD on Nifty Smallcap 250.
Analysts expect that ~82% of stocks on NSE posted positive returns to investors till the end of 19th December this year. Therefore, the benchmark NSE Nifty saw an increase of ~18% YTD. Brokerage firms in India expect Nifty to touch ~21,834 levels by December 2024 and they expect that ongoing positive momentum in Indian markets is expected to continue in 2024 despite adverse factors such as Russia-Ukraine war, Israel-Hamas war, increased levels of global inflation, etc.
With this in mind, we will now have a look at stocks likely to deliver double digit returns.
1. Sansera Engineering Limited
The company has been categorised as a largest automotive component manufacturers in India. It is an engineering-led integrated developer of complex and critical precision engineered components throughout automotive and non-automotive sectors.
It has announced its unaudited financial results for quarter ended September 30, 2023. It reported strong performance on semi-annual basis, with its revenues and EBITDA both increasing at ~16%. Cashflow from operation of the company saw a solid growth of 84% year-over-year in 1H24.
Orderbook of the company was skewed towards its newer segments, i.e., xEV & Tech-Agnostic and Non-auto. This was expanded considerably during 2Q24 to touch INR19.34 billion. Overall in the fiscal, it saw new order wins to tune of INR6 billion, exhibiting unprecedented growth over previous years. To meet such increased demand, the company continues to work on strengthening its organization structure. Long-term targets of the company were developed around its core competencies in high engineering and precision. Given this focus, it was able to deliver consistent results while adhering to mantra of growth with the help of diversification.
The company’s international business saw impressive growth of 40% year over year, and its net debt came in at INR 6.2 billion (Sept-23). In comparison to high base in 2Q23, the company’s domestic business was flat. However, it saw growth of 10% against 1Q23. Coming to the geographical contribution to its sales, India contributed ~71.3%, Europe contributed ~16.3%, USA made the contribution of ~9.5%, with Other Foreign Countries contributing ~2.9%.
2. Prince Pipes and Fittings Limited
Prince Pipes and Fittings Limited has been categorised as one of India’s largest integrated piping solutions & multi polymer manufacturers, which is based out in Mumbai, Maharashtra.
It announced its unaudited financial results for quarter and 6 months to 30th September 2023. It saw an overall healthy performance for 2Q as a result of growth in its plumbing segment and agile execution of newly launched categories. The company’s improved product mix, tough input cost control, strong marketing strategy, and good volume growth led to solid margin expansion during 2Q24. PVC prices saw some correction in the month of October. However, the company expects that it should enhance affordability and help in improved volumes.
Revenues of the company came in at INR656 crores, exhibiting a rise of 3%. Its EBITDA was INR94 crores in 2Q24. Its finished goods volume went up by ~8% year-over-year in 2Q24 due to growth throughout Plumbing and SWR segments.
PAT of the company saw an improvement for 2Q at INR 71 crore in comparison to INR -24 crore in 2Q23 including exceptional items for quarter. Its half-year ended 30 September exhibits net gain of INR17.93 crore related to settlement of registration of Corporate office, at The Ruby, Dadar, Mumbai, on the basis of valuation report.
IDBI Capital provided the ‘Buy’ rating on the company’s shares with target price of INR 913, exhibiting potential upside of ~24%.
3. Greenpanel Industries Limited
The company has been categorised as foremost wood panel manufacturer in India, which is known for its top-quality Medium Density Fibreboard (MDF), Plywood, and Flooring.
It released its unaudited consolidated financial results for the quarter ended 30 June 2023. Consolidated operating margins of the company for 1Q24 came at ~18.7%. It maintained its working capital discipline despite increasing its wood inventory to prepare for monsoon season.
Net debt of the company reduced to negative INR165 crores as of 30 June 2023. Net sales of the company during 1Q24 came in at INR385.16 crores against INR462.75 crores in 1Q23. MDF Sales declined by ~13.2% at INR340.17 crores and contributed 88% of the topline. Domestic realisations declined by 1.3% at INR 32,925 per CBM, with export realisations declining by 25.0% at INR 17,945 per CBM.
In 1Q24, gross margin of the company declined by 350 bps year-over-year at 58.1%. EBITDA margins declined by 1125 bps to sit at ~18.7%.
Conclusion
While above are some of the stocks likely to deliver double digit returns, there are several other fundamentally strong companies which should perform better over the medium-term. In 2024, Indian benchmarks are expected to maintain its positive trajectory, as per the several fund managers. However, next year’s risks, such as crude oil prices and the upcoming 2024 elections, are expected prevail.
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