Top 5 Multibagger Stocks for 2024

The soaring Indian stock market has hit some turbulence this week.

The recent geopolitical tensions have caused serious concerns in the market. The correction over the last few days has re-opened the debate about a crash in the stock market.

We at Equitymaster, believe that there's no need to sell your stocks because of the recent correction unless they're of a fundamentally poor quality or the main reason for investing in them has changed.

In fact, we believe long-term investors if they see lower stock prices, they can consider buying the stocks on their watchlists.

This is because market crashes always bring down the prices of at least some fundamentally strong stocks. Such opportunities are great for long-term investors.

But which kind of stocks should these be?

Well, the obvious answer would be the potential multibagger stocks.

Investors don't look for multibagger stocks when the markets are volatile, preferring to wait for stability to return before buying these stocks on their watchlists.

This is understandable but it could prove to be counterproductive. There is a possibility that the smart money will buy the stock during the volatile period. This buying pressure can cause the stock to rise and result in a higher buying price for every other investor.

This is why if you have a multibagger watchlist, the best course of action is to buy these stocks at every correction as it's happening, rather than waiting for prices to stabilise.

With that said, here are 5 candidates for a multibagger watchlist in 2024...

#1 Asian Paints

The first name on this list is Asian Paints.

Its India's largest paint company, renowned for its wide range of products including varnishes, enamels, and lacquers.

Established in 1942, company operates in 15 countries with 26 production sites globally. It serves customers across 60 nations under various brand names like Apcolite and SCIB. Domestically, it's the dominant paint brand across segments.

The stock is among the bluest of bluechips in India. However, recent concerns over heightened competition with Grasim Industries entering the decorative paints segment with its Birla Opus range have led to a correction in the stock price.

The biggest cause for concern for the paint makers has been its Rs 60 bn capex. Grasim Industries has tapped major advertising firms to market the product. It may also tap into their pre-existing distribution network for offerings like Birla White and UltraTech Cement.

With 25-30% of the paint market in the unorganised sector, Birla Opus is poised to capture a significant share. Even well-established players are expected to feel the impact of the heightened competition.

The anticipation of intensified competition has investors rattled as it is expected to impact both volume growth and margins for paint manufacturers, including Asian Paints.

However, Asian Paints has strategically diversified into non-paint businesses over the past decade, offering a comprehensive home decor solution. From modular kitchens to sanitaryware and furniture, the company caters to diverse customer needs.

Investing in eco-friendly paints and enhancing its technological capabilities through strategic acquisitions, such as acquiring a majority stake in a speciality chemical and nanotechnology player.

While Grasim emerges as a contender in the paint sector, Asian Paints' diversified approach and technological advancements suggest it remains resilient amid evolving market dynamics.

To know more, check out Asian Paints' financial factsheet and its latest quarterly results.

#2 Hindustan Unilever

Next on this list is Hindustan Unilever (HUL).

HUL, part of the Unilever group, is India's leading Fast Moving Consumer Goods (FMCG) company. It has a vast portfolio of over 44 brands spanning 14 diverse categories such as fabric solutions, home and hygiene, skin care, and foods. 9 out of 10 households in India consume at least one HUL product.

In a competitive landscape featuring multinational, domestic, and regional FMCG firms, HUL holds either the top spot or a strong second position in most categories it operates.

Its portfolio targets various market segments, including premium, mid-price, and economy, setting it apart from competitors focused solely on premium or mass markets.

HUL boasts one of India's finest distribution setups, with an extensive distribution network comprising over 4,500 distributors and 8 million (m) retail outlets. Its revenue skew towards health and hygiene segments provides a relatively advantageous position compared to peers.

Recently, HUL faced challenges with margins in its home care and beauty & personal care segments falling below expectations.

Increased competition in detergent bars affected home care, while declines in skin care product sales impacted the beauty & personal care overall.

Volumes declined in foods and refreshments too due to consumer shifts to lower-priced tea brands. The rural slowdown and active local competitors in rural India also contributed to weaker growth.

Looking ahead, the company anticipates gradual demand recovery, linked to rural income growth and better crop yields. In FY25, HUL plans to split its beauty and personal care business to focus on driving growth and premiumisation in the beauty segment.

To know more, check out HUL's financial factsheet and its latest quarterly results.

#3 Hindalco

Hindalco Industries is an Indian aluminium and copper manufacturing company. The company is a subsidiary of the Aditya Birla Group.

Hindalco is the largest aluminium rolling and recycling corporation in the world, as well as a major copper player. It is also one of Asia's top primary aluminium producers.

Building and construction, auto-motives, packaging, electrical, consumer durables, refractories, and ceramics are some of the industries it serves.

Along with its global subsidiary Novelis Inc., Hindalco has a presence in 12 countries. From bauxite mining to alumina refinement, aluminium smelting, rolling, and extrusions, the company engages in a wide range of operations.

The company has thrown its hat into the EV ecosystem. Hindalco, in December 2023, announced its plans to invest Rs 8 billion (bn) to set up a battery aluminium foil plant in Odisha as it evaluates opportunities in the electric mobility value chain.

The Odisha unit will be located alongside a 25 MW solar power plant. It can access extra solar energy from a 400 KV national grid connection. This 25,000-tonne plant will be commissioned by July 2025.

Hindalco expects national demand for battery-grade aluminium foil to reach 40,000 tonnes by 2030, prompting their foray into this space. The unit will initially focus on exports. The target market will be abroad and domestically.

Hindalco is in the process of qualifying as a supplier with lithium-ion cell manufacturers in India, Europe, and the United States.

It has also further signed a memorandum of understanding (MoU) with Phinergy, a metal-air battery technology firm, and IOC Phinergy, a joint venture between Phinergy and the Indian Oil Corporation.

The MoU commits to research, development, and pilot production of plates for aluminium-air batteries and recycling of aluminium after usage in batteries.

Going ahead, the company is focused on downstream expansions in India, with an emphasis on increasing contributions from value-added products. This strategy aims to enhance profitability and protect the company from fluctuations in aluminium prices.

Further, it expects to sustain its positive momentum in the copper business, driven by increasing volumes, robust demand, and improved TC/RC (treatment charge/refining charge) margins.

For more details about the company, check out Hindalco's Fact sheet and its latest quarterly results.

#4 Kotak Mahindra Bank

Kotak Mahindra Bank is among the leading private sector banks in India with a total loan book (assets under management as of FY23) of nearly Rs 4 tn.

It enjoys a strong urban franchise in India with an extensive distribution network of more than 1,750 branches and 2,800 ATMs. The lender enjoys a strong presence in the retail segment and is investing significantly in digital platforms.

Moreover, through its subsidiaries, it has also built a presence in businesses like auto loans, broking, life insurance, and asset management.

Between 2019-2023, the advances and net profit reported a 5-year CAGR of 11% and grew at 19.2%, respectively.

While the company has maintained its NIMs in the range of 4-3-4.6% over the last 10 years, FY23 was higher at 5.3% driven by driven by our risk adjusted pricing on loans.

Its return on equity (ROE) has averaged 12.4% over the same period.

The lender's asset quality has improved drastically, with the NPAs going down from 0.75% in 2019 to 0.37%. Moreover, its CASA

The company continues to guide for steady growth trend and aims to improve the mix of unsecured loans, expressing confidence in the quality of the underlying portfolio.

The lender boasts a well-capitalised balance sheet with a healthy CAR of 19.9% as of December 2023.

To know more, check out Kotak Mahindra Bank's financial factsheet and its latest financial results.

#5 Power Grid Corporation

Last on this list is Power Grid Corporation.

Established in 1992, Power Grid is among the biggest public-sector undertakings (PSUs) in India.

From humble beginnings it has grown to become the largest power transmission company in India. The company has expanded rapidly to meet the country's insatiable demand for electricity.

By carrying electricity through its nationwide grid network, the company acts as a connecting factor between power-generating companies and power-trading companies.

When it comes to getting renewable energy to the home of every Indian, it has a pivotal role to play in the coming decades. The company also ventured into EV charging infrastructure and is setting up charging stations across the country.

Along with having a monopoly status, the company has rewarded its shareholders with hefty dividends over the years. The company's 5-year average dividend payout ratio is 54.3%.

Going forward, the company plans significant investments in expanding the transmission network with a focus on interstate and intrastate projects. This aims to connect renewable energy sources, improve grid stability, and facilitate electricity trading.

growth in renewable energy capacity, EV charging network, and 5G telecom will also drive Power Grid's revenue and profitability.

For more details, check out Power Grid's fact sheet and its latest quarterly results.

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...