Which Stock has the Potential to Deliver Multibagger Returns?

Updated: Nov 16, 2019

Balkrishna Industries Ltd. (Current Price: 747 Rs.)

About the Company:

Balkrishna Industries is engaged in the business of manufacturing and selling of Off-Highway Tyres (OHT) in the specialist segments such as Agricultural, Industrial & Construction, Earthmovers & Port, Mining, Forestry, Lawn & Garden and All Terrain Vehicles (ATV).

Top Reasons:

1. Compounded Sales Growth of last 10 Years: 15.71%

2. Compounded Profit Growth of last 10 Years: 26.48%

3. The company has very less debt. (o equity: 0.18)

4. ROE, ROCE, ROA, Gross Profit Margin and Net Profit Margin, all are better than the industry average. (It’s rare)

5. Free cash flow data:

. Free cash flow 5years: 2,585 Cr.

. Free cash flow 3years: 1,116 Cr.

. Free cash flow last year: 92.96 Cr.

6. Pledged percentage: 0.00 %

7. Shareholding pattern. | Promoter holding: 58.30 %

8. The company has 101 times the potential to pay its short term Interest payments. As Interest Coverage is 101.74. Company has also been maintaining a healthy dividend payout of 17.17%.

9. Company has been maintaining a healthy dividend payout of 17.17%

Why All tyre stocks are down?

Shares of tyre makers are trading weak on concerns of margin pressure due to rise in raw material costs, particularly natural rubber. Natural rubber prices have turned positive after a gap of two years in the domestic market during the first quarter of the current fiscal year. The price of natural rubber is up to a staggering 23% from a low of Rs 11,915 in January.

Whenever these prices will again fall down, there won’t be any issues of the margin and we will see stellar growth.

This company is 32 years old and it never had a single governance issue.

Big Mutual Funds have already started accumulating the stocks at these levels.

This stock may easily deliver better returns in the mid to long term.


Akshay Seth | Linkedin

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