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Saurabh Mukherjea Portfolio: Top 5 Stocks

Feb 11, 2023

Saurabh Mukherjea Portfolio: Top 5 Stocks

Investing in the stock market can be a challenging task, with numerous factors affecting the performance of individual stocks.

However, by taking inspiration from successful investors, we can gain valuable insights and make informed investment decisions.

One such successful investor in India is Saurabh Mukherjea, known for his coffee can investing and impeccable track record.

Let's take a closer look at Saurabh Mukherjea's portfolio and highlight his top 5 stocks. By understanding the reasoning behind these investments, we can learn how to make wise choices and potentially replicate his success.

Who is Saurabh Mukherjea?

Endorsing the coffee can approach to investing, Saurabh Mukherjea is the founder and chief investment officer of Marcellus Investment Managers.

Publicly available data shows that he holds 25 stocks in total. These stocks form part of his PMS fund service - Marcellus investment managers.

Also, these five stocks account for almost 50% allocation of Marcellus' portfolio and are their biggest investments in value terms.

#1 Page Industries

The first company on the list is Page Industries.

According to Marcellus Investment's latest report, Page Industries holds the highest weightage among stocks in Saurabh Mukherjea's portfolio.

Since 2019, Mukherjea's Marcellus investment fund holds Page Industries.

His rationale for the highest allocation into the counter was the strength of its franchise. The company has delivered a very high degree of consistency in healthy fundamentals historically.

This growth was backed by high and rising efficiencies around labor management, advertising and much more.

However, after spotting the lack of tech investments by the company, Mukherjea reduced allocation to Page Industries in mid-2020.

This was because the firm did not invest adequately enough in technology, systems & processes around its distribution and supply chain over 2014-2018.

But even after reducing exposure, Page Industries forms a significant part of his portfolio. That's because post calendar year 2020, the company has transformed its IT infrastructure, systems, and processes across all its functions to create a seamless supply chain.

For the December 2022 quarter, Page Industries reported 3% YoY growth in the revenue at Rs 12.2 (billion) bn, while net profit declined 29% to Rs 1.2 bn. This was primarily due to lower absorption, advertising, and manpower costs.

The company's management is confident about the long-term growth on the back of consumption, industry, and economic drivers.

Over the last three years, Page Industries' revenue has grown at a CAGR of 10.8%, led by strong demand for branded innerwear post-pandemic. The net profit grew at a CAGR of 16.1% due to low operating expenses.

This was mainly because the company undertook calibrated price increases. Moreover, it took strong measures to control the budget and expenses.

With its new Orissa plant becoming operational, it plans to double capacity in the next 2-3 years.

For the upcoming quarters, Page Industries is focusing on cross-selling & up-selling to improve throughput.

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#2 Bajaj Finance

The second stock on the list is Bajaj Finance.

According to Marcellus Investment's latest report, Bajaj Finance holds the second-highest weightage in Saurabh Mukherjea's portfolio.

Mukherjea's Marcellus investment fund holds Bajaj Finance since January 2020.

His bullish bet on Bajaj Finance comes from his belief that the firm is on its path to becoming a fintech giant.

This is because the technology angle of the company can give it a new dimension. Bajaj Finance can become India's top fintech stock.

Mukherjea's bet on the stock came when the NBFC's shares had surpassed several milestones, pushing its market value well over that of the country's largest lender SBI by assets.

After holding the stock for three months, he doubled his investment in April 2020, reallocating 8% of his overall portfolio to Bajaj Finance.

Since then, a significant chunk of his investment is in Bajaj Finance.

For the December 2022 quarter, Bajaj Finance reported 26.3% YoY growth in revenues at Rs 107.8 (billion) bn, while net profit was 40% higher YoY and came in at Rs 29.7 bn. This was led by growth in the loan book.

Over the last three years, its net profit has grown at a CAGR of 10.1%, led by strong customer addition. The net interest income grew at a CAGR of 9.1% on the back of healthy growth in assets under management.

Bajaj Finance today finances more than 70% of all consumer durables financing in India.

With new growth drivers in the form of housing finance, gold loans, and open-source auto financing, the company is in a strong position at the moment.

Also, with digital investments on track, Bajaj Finance is set to reap the benefits of customer acquisition.

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#3 Dr Lal Pathlabs

The third stock on the list is Dr Lal Pathlabs.

According to Marcellus Investment's latest report, Dr Lal Pathlabs holds the third highest weightage in Saurabh Mukherjea's portfolio.

Since 2020, Mukherjea's Marcellus investment fund holds a significant number of shares of Dr Lal Pathlabs.

His bet on the diagnostic company came before Covid-19. The reason he loaded up on the company was on the back of decent dip in non-Covid sales growth.

Revenues for Dr Lal grew by 15-16% before Covid. Due to the 15-16% revenue growth its earnings are compounding around the 20% mark. It has an exceptionally long growth runway.

Diagnostics is a US$10 bn (Rs 825 bn) sector in India, but barely US$1.5 bn consists of formal national chains like Dr Lal Pathlabs.

Also, according to Mukherjea, as there are still mom-and-pop businesses in 85% of the market, a natural consolidation play will result in a great source of free cash flow for Dr Lal Pathlabs.

Mukherjea doubled his investment in April 2020, reallocating a significant portion to Dr Lal Pathlabs by divesting stake in Titan.

This is because post the Covid pandemic, the company's ancillary has benefited as health insurance has risen dramatically, as people come out of Covid with a greater focus on health.

For the December 2022 quarter, Dr Lal Pathlabs reported a 1.5% YoY decline in the revenue at Rs 4.9 bn, while net profit dropped by 8% YoY to Rs 540 million (m) led by a steep drop in Covid and allied testing.

However, the non-Covid revenues for the company rose by 9.1% YoY to Rs 4.8 bn.

Over the last three years, its revenue has grown at a CAGR of 15.6%, led by an increasing number of labs. The net profit grew at a CAGR of 15.5% on the back of an increase in patient footfall.

For the upcoming quarters, the company is planning to focus on geographical expansion to strengthen its presence in tier-two and three towns.

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#4 Asian Paints

The fourth stock on the list is Asian Paints.

According to Marcellus Investment's latest report, Asian Paints holds the fourth highest weightage in Saurabh Mukherjea's portfolio.

Since 2021, Mukherjea's Marcellus investment fund is invested in Asian Paints.

His bullish bet on Asian Paints is because of the company's dominant position with over 60% market share in the industry.

Even after big-pocketed players like JSW Group and Grasim Industries entered the paint industry, Asian Paints continues to dominate the paint industry. This is because of Asian Paints' solid image among construction workers.

The company is also known for its supply chain strategy. Its supply chain is crucial in keeping the company competitive by delivering impeccable product quality and excellent service while maintaining costs.

Even after a steep decline in Asian Paints shares in 2022 due to weak quarterly results, Mukherjea's Marcellus still holds a significant portion of Asian Paints.

This could be attributed to the company's pricing power, sustainable competitive advantages, growing free cash flows at around 25% and because of Asian Paints being a consistent compounding stock.

For the December 2022 quarter, Asian Paints reported a 1.3% YoY rise in revenue at Rs 4.9 bn, while net profit rose by 5.6% YoY to Rs 10.7 bn, led by double-digit growth for the decorative business.

Over the last three years, its revenue has grown at a CAGR of 12.7%, led by increasing sales volumes. The net profit grew at a CAGR of 3.9%, driven by deflation in some of the raw material prices as well as continued operational efficiencies across businesses.

The company has earned an ROE (Return on Equity) of at least 20% every year in the last ten years. This makes it one of the only 100 companies in a universe of 4,000 to have achieved this feat.

To expand the business reach, Asian Paints is planning to invest Rs 34 bn in capacity expansion and Rs 25.5 bn in the backward integration of the business to strengthen the core business.

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#5 Titan

Last stock on the list is Titan.

According to Marcellus Investment's latest report, Titan holds the fifth highest weightage in Saurabh Mukherjea's portfolio.

Since 2020, Mukherjea's Marcellus investment holds stake in the Tata group company.

Marcellus first picked a stake in Titan in 2020 after dumping ITC. He made this move as Titan has a 6% share of the jewelry market in India, which is full of small family jewelers.

Mukherjea is of the view that the company's competitive advantages are unparalleled, making it impossible for a local jeweler to compete with Titan.

Its free cash flows have grown at 30% over the last 20 years.

For the December 2022 quarter, Titan reported a 15.9% YoY rise in revenue to Rs 116.9 bn on the back of an increase in customer walk-ins. The net profit fell by 9.9% YoY to Rs 9 bn due to lower realisation.

Over the last three years, its revenue has grown at a CAGR of 11%, led by increasing capacity. The net profit grew at a CAGR of 13.7%, driven by continuous expansion and an increase in sales.

For the upcoming quarters, Titan is eyeing international expansion for its jewelry business and plans to launch about 20 stores in markets like the US, Canada, and Gulf Cooperation Council countries in the next three years.

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Which other stocks are a part of Saurabh Mukherjea's portfolio?

Apart from the above five, here are some other stocks which are a part of Saurabh Mukherjea's Marcellus investment managers portfolio.

Please note, the source of holdings listed below is from the company's latest monthly report and it may or may not be a complete list of holdings.

Company Market cap (Rs in trillion)
TCS 12.9
HDFC Bank 9.3
Kotak Mahindra Bank 3.5
Nestle India 1.8
Pidilite Industries 1.2
HDFC Life insurance 1.1
Divi’s Laboratories 0.7
Berger Paints India 0.6
ICICI Lombard General Insurance 0.6
Data Source: Marcellus Investment managers

Recently we also wrote about Vijay Kedia Portfolio top 5 stocks and Rakesh Jhunjhunwala & Associates Portfolio: Top 5 stocks.

Stay tuned to get more updates on investment gurus as we cover more such pieces in the coming weeks.

Investment in securities market are subject to market risks. Read all the related documents carefully before investing

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