We have shortlisted two stocks that have already delivered strong returns, but they have tremendous potential to sustain and provide superior returns in the future.
Dixon Technologies (India) Ltd
Established in 1993, Dixon Technologies is a manufacturer and exporter of electronics items. The company started its journey with the manufacturing of color TVs in 1994. Since then, it has expanded its product portfolio by manufacturing many electronic and lighting products, including mobile phones, CCTV security systems, washing machines, battens, downlighters, and LED lights. The company is a contract manufacturer of many electronic items for Philip, Samsung (KS: 005930 ), Xiaomi, and Panasonic. Dixon is looking for backward integration and spreading its wings into various categories related to its products. On the Q4FY2021 conference call, the company’s management expressed confidence to triple its revenue in the next three to four years on an FY2021 basis.
In the last three years, Dixon has more than tripled its revenue. The company posted a 47% year-on-year jump in its revenue in FY2021 to Rs 6,448.2 crore from Rs 4,400.1 crore in its previous year. Its 9-year revenue CAGR stood at ~30%, and its net profit CAGR remained at 75% during the same time frame. Steady opening-up of the global economy, high disposable income, penetration of mobile in across the urban, semi-urban, and rural India, e-commerce growth driving last-mile delivery, Dixon’s increasing share in domestic electronic manufacturing, global brands’ China+1 strategy to strengthen supply chains, Indian Government’s support through PLI scheme along with a healthy balance sheet make the stock a perfect pick for long term. In a year, Dixon Technologies stock more than doubled, touching nearly Rs 4,600 on July 22. Since its listing in September 2017, the scrip returned a whopping 764% to investors. It looks like the scrip is exhausted, but it returned 67.2% in the last six months and is poised to propel further.
Polycab India Ltd
Established in 1996, Polycab India manufactures and sells wires, cables, and fast-moving electrical goods (or FMEG) under the ‘POLYCAB’ brand. The company also manufactures and sells electric fans, LED lighting and luminaires, switches and switchgear, solar products, and conduits & accessories. Polycab diversified into engineering, procurement, and construction (or EPC) business in 2009. The company’s telecom division manufactures OFCs, FRP/ARP Rods, IGFR Yarns, and a complete array of end-to-end passive networking solutions. Polycab is India’s largest manufacturer of cables and wires, with an 18% market share in the organized market.
The present regime in India is hell-bent on improving the existing infrastructure and transforming the country into ‘Digital India.’ Constructing bridges, dams, civic amenities, and smart cities require cables and wires to transmit power. The same is true for fully blown digital commerce. Revival in the residential realty market, rapid urbanization, aspirations for a better life, customer awareness about safer and energy-efficient products should drive the demand for Polycab’s products in the future. On the financials front, Polycab registered an 8-year CAGR of 11.45% for total operating revenue by clocking revenue of Rs 8,856 crore in FY2021. Its profit after tax CAGR stood at a whopping 34.7% during the same time frame. More noteworthy is that Polycab recorded a 9.4% year-on-year growth in net profit in FY2021 touching Rs 831.3 crore despite pandemic woes. In a year, the scrip gained 129.4% and 58% in the last six months—currently, it is trading at a 6% discount to its 52-week high of Rs 2033.
No comments:
Post a Comment