Building a Secure Financial Future: 5 Long-Term Stocks to Watch

The volatility in the stock market can be your best friend, as the swinging markets offer a plethora of great long-term opportunities.

By carefully analyzing stock behaviour, you can potentially scoop up undervalued companies poised for future growth.

Remember, though, investing comes with inherent risk. Every asset class, from stocks to real estate to crypto, carries the potential for both gains and losses.

If you don't like uncertainty, then long term stocks are your best bet. These companies typically boast stable financials and deliver consistent returns, acting as the backbone of a healthy portfolio.

Here are five promising stocks from various sectors, each with strong fundamentals and a demonstrated track record of smart business practices.

Their diversification offers exposure to different industries and markets, maximizing your potential for long-term growth.

#1 PI Industries

First on the list of long term companies is PI Industries.

PI Industries is a prominent player in the manufacturing of insecticides, fungicides, herbicides and speciality products. These are widely utilized in agricultural settings globally.

It enjoys a rich five decades of experience in the agrochemical sector, emerging as a leading producer of generic molecules within India.

The company operates in more than 30 countries worldwide and boasts an extensive distribution network comprising 10,000 active dealers/distributors and over 100,000 retailers nationwide.

PI Industries has successfully developed an intermediate for a COVID-19 drug, diversifying its portfolio.

It aims to meet the rising demand for agrochemicals by expanding into new market segments and introducing new products.

To achieve this, the company is scaling up the capacities of existing products. In the nine months ended December 2023, the company has invested over Rs 1 bn and expects an annual capex of Rs 6-8 bn for organic growth going forward.

These strategic initiatives position PI Industries for enhanced financial performance in the future.

PI Industries Financial Snapshot (2019-23)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	24.47%	17.40%	37.67%	14.87%	23.15%
Operating Profit Margin (%)	21.15%	21.73%	23.81%	22.60%	25.25%
Net Profit Margin (%)	13.60%	12.91%	15.38%	15.29%	18.22%
Return on Capital Employed(%)	25.10%	23.13%	22.09%	17.40%	21.84%
Return on Equity (%)	19.57%	18.63%	18.52%	14.71%	18.45%

Data Source: Ace Equity

Despite facing a challenging macroeconomic backdrop, PI Industries is poised to meet its financial year 2024 revenue growth target of 18-20%.

The stock price has fallen over the past few months, despite delivering strong performance in the first nine months of financial year 2024.

The dip in share value is attributed to concerns surrounding product concentration risk, particularly regarding pyroxasulfone.

However, it's worth noting that generic competition for pyroxasulfone in the US market is not anticipated until 2026.

Looking ahead, PI Industries' recent foray into the pharmaceutical Contract Development and Manufacturing Organization (CDMO) sector offers promising prospects for diversification in the long term.

The promoter holding stands at 46%, as on December 2023.

The stock is available at a price-to-earnings (PE) of 34.5x, a discount of 27% to its 5-year PE of 47x.

To know more about the company, check out its financial factsheet and latest financial results.

#2 Bajaj Finance

Next on this list is Bajaj Finance.

Bajaj Finance is the largest NBFC (non-banking financial company) in India. The lender boasts an AUM (assets under management) of over Rs 2 tn. Its portfolio is geared towards retail and consumer/mortgage finance, accounting for over 80% of the AUM.

Bajaj Finance competes with banks and NBFCs for traditional retail (mainly personal /consumer loans and mortgages) and certain non-retail lending products.

In personal financial services, the company focuses on a relatively lower income group as compared to retail banks that focus on the high networth individuals (HNIs).

The business has been growing well. The private lender's advances have grown over 2.4x in the last five years.

The net non-performing assets (NPAs) have remained steady, in the range of 0.30-0.4% from the financial year 2019, the lowest in the industry.

This is admirable as it indicates the company has kept risks at bay while expanding the business.

Bajaj Finance Financial Snapshot (2019-23)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	44.55%	42.62%	1.21%	18.51%	30.83%
Operating Profit Margin (%)	`	65.31%	59.34%	62.40%	69.36%
Net Profit Margin (%)	21.61%	19.96%	16.56%	22.21%	27.80%
Return on Capital Employed(%)	12.67%	11.95%	9.38%	10.26%	11.76%
Return on Equity (%)	22.62%	20.37%	12.86%	17.59%	23.70%

Data Source: Ace Equity

The company has also increased its profitability. The 5-year CAGR net profit stood at 35.1%. The 5-year average return on equity (RoE) stood at 19.6%.

Bajaj Finance's forte has been the use of data analytics. The company uses artificial intelligence in its financing scheme. This has allowed the business to expand while retaining its credit quality.

However, the stock has underperformed the markets in the past few months, simply because investors and analysts expected a better quarterly update from the company.

But this doesn't take away from the fact that the business is intact and well-poised to grow over the long term.

Bajaj Finance's long-term target is to continue growing its AUM at 25% while maintaining sturdy return ratios. The growth will come from existing verticals in tandem with new ones, such as microfinance, commercial vehicle loans, and tractor loans.

The promoters hold a large part of the business, around 54.8%.

The stock is available at a price to book value of 6.6x, a 42% discount to its 5-year median of 9.4x.

To know more about the company, check out its financial factsheet and latest financial results.

#3 PVR Inox

Third on our list is PVR Inox.

PVR, a trailblazer in India's multiplex industry, revolutionised cinematic experiences by inaugurating the country's first multiplex cinema in 1997 at Saket, New Delhi.

Today, PVR stands tall as India's undisputed leader in film and retail entertainment. Their recent merger with Inox Leisure solidified their dominance, granting them control over a whopping 50% of multiplex screens and a significant 20% share of all movie screens in the country.

The business has been performing well. After three consecutive years of losses, the company will be reporting a net profit in 2024.

However, despite this the stock hasn't performed well in the past six months, falling by over 20%. this comes on the back of poor performance in the December ending quarter.

The first half of 3QFY24 was affected by the Cricket World Cup. However, December 2023 was the highest-grossing month of 2023 for the multiplex leader.

PVR Inox Industries Financial Snapshot (2019-23)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	31.77%	10.70%	-78.13%	119.45%	131.14%
Operating Profit Margin (%)	20.08%	32.64%	48.00%	32.46%	30.04%
Net Profit Margin (%)	6.14%	0.79%	-267.21%	-36.75%	-8.97%
Return on Capital Employed(%)	18.23%	20.58%	-14.80%	-6.03%	6.04%
Return on Equity (%)	14.79%	1.81%	-45.35%	-30.69%	-7.76%

Data Source: Ace Equity

PVR Inox added 29 new screens in the December 2023 quarter but also exited 29 underperforming screens for a total of 1,708 and targets to add 160-170 in financial year 2024.

It is optimistic about the big content line-up across languages in Hindi movies and several big releases in regional and English films.

PVR Inox presents an appealing opportunity within India's discretionary consumption sector. Multiplexes continue to dominate as the primary choice for outdoor entertainment across the country.

The allure of new movie releases, particularly Bollywood films, is expected to fuel a sustained recovery in occupancy rates for PVR Inox.

Worries regarding the performance of Hindi film content are diminishing, thanks to the success stories emerging from Bollywood.

Moreover, the consistent strong performance of English and regional films reaffirms that multiplexes in India are not exposed to significant structural risks.

The promoter holding is at 27.8% as of December 2023.

The stock is available at a Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization (EV/EBIDTA) of 11.2x, a discount of 34% to its 5-year median of 17.2x.

To know more about the company, check out its financial factsheet and latest financial results.

#4 SRF

Fourth on the list is SRF.

SRF is a chemicals conglomerate that manufactures industrial and speciality intermediates.

Leading the market in most of the segments, its portfolio spans fluorochemicals, speciality chemicals, packaging films, technical textiles, and coated and laminated fabrics.

Due to its extensive experience in fluorine, it is the sole producer of some key refrigerants in India.

These features bode well for the business, allowing it to grow exponentially in the last ten years.

SRF Financial Snapshot (2019-23)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	24.95%	1.84%	16.64%	48.22%	19.09%
Operating Profit Margin (%)	19.01%	20.57%	25.75%	25.66%	23.91%
Net Profit Margin (%)	8.49%	12.53%	14.03%	15.06%	14.35%
Return on Capital Employed(%)	13.27%	13.25%	18.17%	24.17%	22.62%
Return on Equity (%)	15.38%	20.22%	20.34%	24.51%	22.91%

Data Source: Ace Equity

The sales and net profits have grown at a 5-year CAGR of 21.2% and 36%, respectively. The RoE has also improved dramatically from 15% in financial year 2019 to 22.9% in 2023.

This robust growth in the business comes on the back of strong domestic demand, rising import substitution opportunities, and strong growth in exports.

Now, the government's proactive support under the 'Make in India' initiative also augurs well for the chemical business.

SRF has been expanding its capacity continuously, spending over Rs 15 bn per annum on capex to meet the growing demand. And now, it plans to spend over 30 bn in the financial year 2023-24.

Recently, the company approved a capex of Rs 2.4 bn for a new plant in Dahej, India. The capex will be funded through a mix of debt and internal accruals.

The new facility will add nearly 600 million tonnes per annum (MTPA) in capacity for the company and the setting up of the same is likely to be completed in 10 months.

SRF's board had approved a capex plan worth Rs 6 bn to set up four new plants for the agrochemical space in November last year. The capex was also meant to be spent on expanding capacity at its Dahej facility.

These projects are a part of the company's overall expansion strategy in the speciality chemicals segment.

As of December 2023, the promoter holding in SRF stands at a satisfactory level of 50.5%.

The stock of SRF has been volatile in the past year, yet it trades at 49.2x, a 48% premium to its 5-year median PE of 32.2x.

To know more about the company, check out its financial factsheet and latest financial results.

#5 Swaraj Engines

Last on the list is Swaraj Engines.

Swaraj Engines manufactures diesel engines for Mahindra & Mahindra tractors. It is a captive unit of Mahindra and Mahindra Ltd., which holds a 34% stake in the company.

Despite the high level of client concentration, the company's revenue has grown at 12.6% CAGR and the profits by 10.7% CAGR over the past five years.

But this nominal growth in topline and the bottom line hasn't affected the company's value over the long term.

Swaraj Engines Financial Snapshot (2019-23)

	2018-2019	2019-2020	2020-2021	2021-2022	2022-2023
Revenue Growth (%)	12.28%	-11.38%	26.59%	15.34%	24.99%
Operating Profit Margin (%)	16.87%	14.64%	14.62%	14.50%	13.95%
Net Profit Margin (%)	9.45%	9.19%	9.38%	9.62%	9.40%
Return on Capital Employed(%)	54.66%	39.29%	48.21%	50.13%	55.51%
Return on Equity (%)	35.42%	30.06%	35.93%	37.40%	41.27%

Data Source: Ace Equity

Swaraj Engines has delivered a stellar return on equity, averaging 36% in the past five years.

Apart from this, the company has a phenomenal dividend yield (an average of 3.6% in the past 5 years). This combined with an immaculate balance sheet makes it an attractive investment.

The company was planning to expand its manufacturing capacity again from 180,000 units to 195,000 units per annum on account of the growing demand for engines.

The entire project was to be funded through internal accruals and surplus of the company, which will keep the company's debt unchanged at zero.

With growing crop output, a hike in minimum support prices, and a good monsoon, the demand for tractors is expected to go up, which will help the company grow its revenue and profits in the medium term.

The company is trading at a PE of 15.8 times, which is at a discount to its 10-year median PE of 20.3 times and the industry PE of 44 times. The balance sheet remains strong, with the current debt-to-equity of 0.1x.

The promoter holding in Swaraj Engines is slightly below the ideal 50% threshold, standing at 52.1% as of March 2023.

The company is currently available at 20.8x, a premium of 14% to its 5-year median PE of 18.2x.

To know more about the company, check out its financial fact sheet and quarterly results.

In conclusion

Investing in stable, fundamentally sound companies can sometimes allow investors to generate outsized returns.

All of this comes from the ability of fundamentally strong companies to weather short-term market volatility. But the key is to do your own research, despite the positive odds.

While conducting thorough research is crucial, these 5 long-term stocks can serve as a great starting point for your investment radar.

But there is no reason to believe that the long-term winners of the past will remain long-term winners in the future.

So, monitoring their performance, analysing industry trends and studying significant developments is crucial. Avoid it if it's at a crazy multiple of earnings.

It can help you stay informed and seize potential investment opportunities at the right price to generate substantial long-term wealth.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...