ICICIdirect lists out 5 stocks with potential to become multibaggers

At least 26 stocks in the BSE500 index managed to deliver over 100 per cent returns to investors over the past 24 months despite the ongoing volatility in the equity market.

Data shows Adani Green Energy surged the most at 660 per cent between August 2018 and August 2020, followed by GMM Pfaudlers (up 430 per cent), Alkyl Amines Chemicals (up 406 per cent) and Navin Fluorine International (up 228 per cent). BSE benchmark Sensex has risen just 1.50 per cent in this period.

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Brokerage ICICIdirect says companies with a strong uptick in a performance led by capacity utlisation, improving product mix, higher margins robust cash flows and improvement in the balance sheet will see massive re-rating of investment multiples going forward.

Based on this criteria, the brokerage has shortlisted five stocks which, it said, can together generate 50-100 per cent return over the next 18-24 months.

TCNS Clothing: TCNS Clothing is poised to capture high trajectory growth opportunities in the Indian ethnic wear segment through its three popular home-grown brands. The brokerage is positive on the long-term outlook, considering the company’s strong brand franchise, track record of robust return ratios and debt-free status

EIH: The ongoing crisis to lead supply reduction of 15-20 per cent of total industry room inventory over the next 12-18 months. With total premium room portfolio of over around 4,800 rooms, the stock is trading at a significant discount of around 50 per cent to its current replacement value which also remains one of the key triggers for re-rating of the stock in the long run

Persistent Systems: The company’s consistent focus on large annuity-oriented deals, increase in deal sizes and less reliance on top client bodes well for service growth in the long term. Substantial cash on the balance sheet and considering multiple levers for cost rationalisation, ICICIdirect expects margins to see an improved trajectory in long term.

Bajaj Electricals: Sharp revival in demand post ease in lockdown restrictions and limited exposure in project business coupled with debt reduction plan would lead to a significant fall in interest outgo. The broking firm expects company earnings to grow at CAGR of around 30 per cent between FY20-22E.

V-Guard: V-Guard has for its long term growth potential in the brown goods space. Despite challenging conditions of lockdown, the company has generated cash flow from operations of Rs 216 crore in Q1FY21 with improvement in working capital turnover. ICICIdirect expects earnings of V-Guard to grow at a CAGR of around 10 per cent in FY20-22E.