Top 5 Growth Stocks That Could Continue Outperforming the Nifty 50

If you're an investor looking for good returns from the stock market, exploring promising growth stocks holds significant potential.

These companies offer the chance for solid long-term gains, due to their ability to grow their revenues and profits at a rate faster than the market. These are often outperforming stocks in the market.

However, such stocks can be more volatile and test investor patience when the market isn't going up.

Doing your research into these stocks is crucial. You should identify promising growth stocks based on a number of factors. This can be a rewarding activity for investors.

If you're looking for growth stocks, keep an eye on the revenue and profit performance, industry trends, return ratios, and any important news.

By staying aware of market changes and taking advantage of opportunities, investors can make the most of positive trends while protecting their investments from potential risks.

In this editorial, we will look at the top 5 growth stocks that are outperforming the Nifty and can continue to do so.

#1 HAL

Hindustan Aeronautics ltd (HAL) is an Indian public-sector aerospace and defence company.

Established on 23 December 1940, HAL is one of the oldest and largest aerospace and defence manufacturers in the world. It's the only Indian company to have specialisation in manufacturing and maintaining aircraft services.

The company develops, designs, manufactures, and supplies aircraft, helicopters, avionics, and communications equipment for military and civil markets.

It's aggressively pursuing exports by leveraging its range of indigenous products, particularly highlighting the capabilities and safety of platforms like LCA Tejas. The defence acquisitions council has given a green signal to buy 97 units of Tejas Mark-1A fighter jets.

Hindustan Aeronautics and the leading European aerospace company, Airbus, joined hands by signing a contract. They are planning to create a maintenance, repair, and overhaul (MRO) facility for the A320 family of aircraft in New Delhi.

This is a big deal because this partnership will boost the Make in India initiative and will make India more self-reliant in repairing and maintaining aeroplanes.

HAL's plan is to make an MRO hub in New Delhi which offers one stop solution for commercial airlines. The goal is to have the facility ready by November 2024.

In FY24, the company's revenue from operations grew 12.8% to Rs 303.8 billion (bn). Its net profit grew 30.1% to Rs 76.2 bn.

During the financial year, HAL received major orders worth more than Rs 190 bn, along with repair and overhaul contracts of over Rs 160 bn.

The company's order inflow includes the supply of 25 Dornier aircraft to the Indian Navy and orders for engines for the MiG-29 aircraft of the Indian Air Force.

The company's management has some exciting plans in the pipeline. They are gearing up to create a new business division with a focus on boosting exports.

As a continuation of their focus on expansion, the company is looking for partners from around the world and even opening up export offices in specific places.

While exploring new opportunities, the company will continue to focus on its core business of upgrading aircraft. This includes changes like giving planes an avionics upgrade, integrating new weapon systems, etc.

To know more, check out the HAL factsheet and quarterly results.

#2 Zomato

The stock of Zomato has become a huge turnaround story in the Indian stock market.

The company was off to a rocky start in the stock market following its initial public offering (IPO). Initially, the stock fell, leading to significant criticism from investors who were concerned about the company's profitability and growth prospects.

The scepticism was rooted in the company's high valuation at the time of its IPO and the challenges faced by tech startups in the market.

However, over time, Zomato's stock has witnessed a remarkable turnaround. Several tailwinds have contributed to this positive shift in sentiment.

One of the key factors has been the company's continued growth in its core food delivery business, along with its expansion into new verticals such as grocery and nutraceuticals.

The platform company's foray into hyperlocal delivery (Zomato Instant, Blinkit) and loyalty programs (Zomato Gold) offer promising new revenue streams.

In FY24, consolidated revenue from operations stood at Rs 121.1 bn, up 71% from Rs 70.8 bn in FY23.

The company is also profitable now. In FY24, the food delivery platform reported a consolidated net profit of Rs 3.51 bn. The company had posted a consolidated net loss of Rs 9.71 bn in FY23.

Zomato's efforts to improve its operational efficiency and thus reduce losses have been well-received by the stock market.

The e-commerce arm of Zomato - Blinkit - hiked its delivery charges by Rs 11-35 in the Delhi and Mumbai regions. This has contributed to higher profits.

Zomato also started charging a nominal platform fee of Rs 2-5 for each order which helped it to improve its margins further. Going forward, Zomato plans to focus on expanding footprint in larger cities for Blinkit.

India's online food delivery market is projected to reach US$ 16 billion (bn) by 2025, making Zomato a frontrunner in a sector brimming with future potential.

To know more, check out the Zomato factsheet and quarterly results.

#3 Dixon Technologies

Dixon Technologies is at the forefront of India's electronics revolution.

It's the country's largest home-grown EMS player. It's also the biggest manufacturer of LED TVs in India, producing for the likes of Samsung, Panasonic, Xiaomi, TCL, OnePlus and many more.

The company manufactures lighting products for Philips, Havells, Syska, Bajaj, Wipro, and Orient as well as semi-automatic washing machines for clients like Godrej, Samsung, Lloyd, and Panasonic.

Apart from this, it also dabbles in manufacturing mobile phones and other hardware catering to the needs of Acer, Motorola, Nokia and the recently added Xioami.

Dixon Technologies has been manufacturing mobile phones and their parts since 2016. However, the business didn't pick up until the push from the government in the form of PLI incentives.

These incentives have played a pivotal role in the company securing contracts and establishing collaborations with leading global mobile phone manufacturers.

As part of its strategic plan, the company aims to export 30% of the total production capacity over the next two to three years.

Recently, Dixon Technologies announced that it will now make Alphabet Inc's super-premium Google Pixel 8 smartphones in India. According to the company, Dixon's first batch of India-made Pixels may hit the market as early as September 2024.

It may also make older and upcoming models like the AI feature-heavy Pixel 9, which has a new design language, later this year.

The company has also signed a Rs 15 bn agreement with Nokia to develop and manufacture telecom equipment which will include fixed wireless access points and routers.

In FY24 the company reported consolidated revenue of Rs 177.1 bn compared to Rs 122 bn in FY23, an increase of 45.2%. The company's consolidated net profit stood at Rs 3.75 bn compared to Rs 2.55 bn in FY23, up 47%.

To know more, check out the Dixon Technologies factsheet and quarterly results.

#4 Tata Power

Tata Power has transformed into India's undisputed energy powerhouse.

The company's presence extends across the electricity value chain, including generation, transmission, and distribution. It boasts an installed generation capacity of 14 GW, of which 8.8GW is from thermal, and the balance is from clean energy sources such wind, solar, and hydro.

Tata Power aims to become the frontrunner in India's clean energy revolution. It's investing heavily towards this transition, building an expansive EV infrastructure, and setting up EV charging stations across the country.

The company is also present in consumer-centric businesses such as solar rooftops, pumps, microgrids etc. Tata Power holds 13% of the domestic solar module market. The aim is to increase this share to 20%, supported by the company's new solar cell and module manufacturing unit in Tamil Nadu.

Tata Power's subsidiary, Tata Power Solar, will have its manufacturing plant fully operational this year. Then the company's total installed solar module capacity will reach 4.9 GW, including a 600 MW annual capacity at its Bengaluru plant.

For the sale of its rooftop solar units, Tata Power will rely on its network of over 500 channel partners across 450 cities. The company plans to double this network to 1,000 channel partners within the year.

Apart from this, Tata Power Group's arm Tata Power Renewable Energy Ltd has started commercial production of solar modules from its new plant in Tamil Nadu, with the solar cell production set to commence in June 2024.

This development is expected to boost several capacity-addition projects that require locally manufactured products. The new solar cell and module facility of Tata Power Renewable Energy produced about 130 MW of modules in the March 2024 quarter.

In FY24 the company reported its highest ever revenue and net profit at Rs 615.42 bn and Rs 42.8 bn respectively. The revenue and profit grew by 10% and 12% respectively. The company's bottomline has now grown for 18 consecutive quarters.

To know more, check out the Tata Power factsheet and quarterly results.

#5 M&M

Mahindra and Mahindra (M&M) is the flagship company of the Mahindra group, which consists of diverse business interests across the globe.

It operates through the following segments: automotive, farm equipment, and others. The automotive segment comprises of sale of automobiles, spare parts, and related services.

The farm equipment segment involves the sale of tractors and spare parts. The others segment includes agri, construction equipment, powerful, and spares business units.

It's one of the most reputed brands in India for automobiles. Since its inception in 1945, the company has been going strong, with its cars among the most trusted and most reliable cars in the market.

M&M is ready to ramp up again after streamlining its operations. Following exits from non-core businesses wherein it exited around from 15 business unblocking funds worth 13.9 bn. The company is now laser-focused on its expansion plans.

In FY24 the company reported a consolidated revenue and net profit of Rs 1,390.8 bn and Rs 112.7 bn respectively. The topline and bottomline were up 15% and 25% respectively over the previous year.

The company has unveiled a massive investment plan of Rs 370 billion (bn) over the next 3 years. This cash infusion will be spread across their various businesses, with the auto sector receiving the biggest chunk of the investment.

M&M is bullish on both electric vehicles (EVs) and internal combustion engine (ICE) vehicles, particularly SUVs. The plan is to aggressively develop both segments.

The auto company aims to invest Rs 140 bn in ICE vehicles by FY25. It will invest Rs 120 bn for the electric vehicle arm, Mahindra Electric Automobile (MEAL) over the next three years.

The farm equipment business, a major cash generator, will get Rs 50 bn. The services sector, encompassing companies like Tech Mahindra and Mahindra Holidays, will also receive Rs 50 bn.

For more details about the company, you can have a look at Mahindra & Mahindra's factsheet and quarterly results.

Conclusion

Growth stocks in India have garnered significant attention, especially in recent years, as the country's economy continues to experience rapid expansion.

These stocks offer a great opportunity for investors to capitalise on India's economic progress. But before you go about investing in growth stocks, it's important to do proper research into these stocks and understand the risks involved.

Moreover, bear in mind that 2024, being an election year, introduces an element of uncertainty. These events usually add volatility to the stock markets. Changes in policies and regulations tend to impact the business environment, potentially affecting the performance of companies.

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...