Top 5 Emerging Bluechip Stocks to Add to Your Watchlist

With Indian share markets touching new highs daily, a lot of investors are now putting in huge sums in fundamentally strong companies to make the most of this momentum.

For many investors, bluechip stocks are a go-to choice as they offer stability to a portfolio. Like dividend stocks.

The primary reason behind this is that these stocks are well-established, financially sound and pay regular dividends.

Nevertheless, in recent times, midcaps and smallcaps have gained more attention, as they come with high growth potential compared to bluechips.

While the big companies will get bigger, there are some smallcap and midcap companies that have the qualities that could make them a future bluechip stock.

These companies are called emerging bluechip.

We have shortlisted five such emerging blue chip companies using the Equitymaster stock screener.

Let's take a look at each of them in detail...

#1 LTI Mindtree

First on the list is LTI Mindtree.

In November 2022, Larsen & Toubro Infotech (LTI) merged with Mindtree to establish LTI Mindtree.

This merged company is the fifth largest IT services company in terms of market capitalisation.

LTI Mindtree is a global technology consulting and digital solutions company. It is engaged in the business of analysing, designing, converting and coding IT-enabled services.

The company offers a wide range of services, including consulting, cloud and infrastructure, cyber security, and data analytics, to over 35 countries across the globe.

Its services enable enterprises across industries to reimagine business models, accelerate innovation, and maximise growth by harnessing digital technologies.

LTI Mindtree's client base includes companies from various industries, including banking and financial services, communications, media and entertainment, healthcare, utilities, energy, and insurance.

It also has strategic alliances with several big names in the technology space, including Microsoft, IBM, Oracle, SAP, and Adobe.

So, what makes this company one of the top emerging blue-chip companies?

LTI Mindtree's financial performance is consistently improving. In the last five years, the revenue has grown at a compound annual growth rate (CAGR) of 28.2%, driven by growth across all segments and geographies. The net profit has also grown at a CAGR of 23.8%. In CAGR terms, delivering 20-25% growth consistently is a mean feat.

The company's return on equity (RoE) and return on capital employed (RoCE) stand at 27.4% and 36.9% as of financial year 2023.

It also pays consistent dividends to shareholders and has a five-year average dividend payout and a five-year average dividend yield of 32.9% and 1.4%, respectively.

Financial Snapshot of LTI Mindtree (2019-23)

	FY19	FY20	FY21	FY22	FY23
Revenue (Rs m)	97,504	112,167	126,573	268,946	337,529
Revenue Growth (%)		15.0%	12.8%	112.5%	25.5%
Net Profit (Rs m)	15,155	15,205	19,382	39,500	44,103
Net Profit Growth (%)		0.3%	27.5%	103.8%	11.7%
Return on equity (%)	31.4%	28.5%	26.8%	28.0%	27.4%
Return on capital employed (%)	42.2%	39.1%	36.9%	38.4%	36.9%

Source: Equitymaster

Apart from financials, the recent merger with Mindtree has made the company bluechip worthy.

The merger has given the combined company an opportunity to become stronger, operate on a large scale, expand its client base without overlapping, offer better services, cut costs, and earn more profit.

Post the merger, LTI Mindtree has won several deals, which would have been difficult for individual companies separately.

The company also adopted a new framework, LTIM One, which will focus on unifying the organisation through one culture, one GTM (Go-To-Market) strategy, one unified capability, and one profitable growth model.

Given its presence across all emerging technologies, a robust pipeline of several large deals, and strategic alliances with several big technological companies, the company is poised to grow in the medium term.

To know more, check out LTI Mindtree's financial factsheet and latest quarterly results.

#2 SRF

Second, on the list is SRF, a diversified manufacturing company.

The company operates in four segments: chemical, packaging films, technical textiles, and coated fabrics.

It has operations in four countries and exports to over 90 countries across the globe.

SRF has 14 manufacturing facilities across 4 countries where it manufactures its diversified products.

Its products are used in automobile, pharmaceutical, air conditioning, food and agro, chemicals, and mining industries.

SRF believes in innovation and invests heavily in research and development (R&D). It is building a knowledge-based product portfolio currently.

As part of this goal, it launched 6 new products in the agro and pharma space and commercialised 10 products in the packaging film business in the financial year 2023.

The company was also granted three new patents during the year, taking the total count of patents to 130.

SRF is one of the companies that has announced massive capex. It has planned a capex of Rs 150 billion (bn) between financial years 2024-28. A majority of it will be invested in the chemical business and the rest in the packaging film business.

With this capex, the company plans to launch new products, enter new markets, and increase the share of value-added products in revenue.

In the last five years, the company's revenue has grown at a CAGR of 16%, driven by volume growth. The net profit also grew at a CAGR of 29.6% amid softening of raw material prices.

The RoE and RoCE stand at 21% and 24% at the end of the financial year 2023. It also paid dividends consistently to shareholders.

Financial Snapshot of SRF (2019-23)

	FY19	FY20	FY21	FY22	FY23
Revenue (Rs m)	71,276	72,585	84,664	125,492	149,452
Revenue Growth (%)		1.8%	16.6%	48.2%	19.1%
Net Profit (Rs m)	5,916	9,159	11,983	18,889	21,623
Net Profit Growth (%)		54.8%	30.8%	57.6%	14.5%
Return on equity (%)	14.3%	18.6%	17.5%	22.1%	21.0%
Return on capital employed (%)	15.4%	15.4%	19.8%	26.2%	24.0%

Source: Equitymaster

Given the growing demand for chemicals in and outside India, anti-pollution measures in China, and continued investments in its chemicals business, SRF is all set to witness robust growth in the medium term.

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

#3 Jubilant FoodWorks

Next on the list is Jubilant FoodWorks.

Part of the Jubilant Bhartia Group, it is one of the largest food services companies.

It holds master franchise rights to two of the most popular international brands - Domino's Pizza and Dunkin Donuts.

Apart from India, Jubilant FoodWorks has franchise rights to Domino's Pizza in Sri Lanka, Bangladesh, and Nepal, making it one of the largest franchisees of Domino's outside the USA.

During FY23, the company opened 249 Dominos stores in India, taking the total store count to 1,816 stores and entering 56 new cities.

In March 2021, the company took franchise rights to Popeye's, a fast food restaurant based in the USA and is currently opening stores across Bangalore.

The company also recently launched its first homegrown brand Hong's Kitchen, a Chinese restaurant.

Apart from launching stores across the country, it invested heavily in improving its delivery service. This has helped the company improve its revenue from delivery services.

In the last five years, the company's revenue has grown at a CAGR of 7.4%, driven by strong growth in online orders. The net profit has grown at a CAGR of 2.3% during the same time.

The RoE and RoCE currently stand at 21.6% and 36%, respectively while the company also pays dividends consistently.

Financial Snapshot of Jubilant FoodWorks (2019-23)

	FY19	FY20	FY21	FY22	FY23
Revenue (Rs m)	36,105	39,969	33,849	44,375	52,080
Revenue Growth (%)		10.7%	-15.3%	31.1%	17.4%
Net Profit (Rs m)	3,180	2,788	2,305	4,181	3,530
Net Profit Growth (%)		-12.3%	-17.3%	81.4%	-15.6%
Return on equity (%)	25.3%	25.0%	16.2%	21.6%	17.7%
Return on capital employed (%)	39.0%	50.9%	33.0%	36.0%	16.0%

Source: Equitymaster

Jubilant FoodWorks plans to open 3,000 Dominos stores and 250-300 Popeye stores in the near term.

With more Indians eating out and online deliveries on the rise, the company has a lot of scope as India is still an under-penetrated market when we compare it with rise in the overall income levels of the population.

All these factors could contribute to Jubilant's growth in the long run.

To know more, check out Jubilant FoodWorks' financial factsheet and latest quarterly results.

#4 KPR Mill

Fourth on the list is KPR Mill.

It's the largest vertically integrated apparel manufacturing company in India.

The company manufactures a wide range of products, such as yarn, fabric, and garments.

It has a strong customer base spread across India and the world. In India, it has over 1,300 regular clients for yarn and fabric and over 60 international brands for garments.

The company also exports to over 60 countries.

It has twelve state-of-the-art manufacturing facilities with a capacity to produce 100,000 metric tonnes (MT) of yarn, 4,000 MT of vortex viscose yarn, 157 million (m) of knitted garments, and 25,000 MT of fabrics.

KPR Mill also manufactures sugar, molasses, and ethanol. It has the capacity to produce 20,000 TCD (tons of canes per day) of sugar and a 360-kilo tier per day (KLPD) of ethanol.

The company also produces power from wind and solar sources for captive use. So it's already riding on two new megatrends - ethanol and renewable energy.

Also, being a vertically integrated company 'from fibre to fashion' helps it maintain the cost to a minimum. This is the reason why it has reported excellent numbers over the years.

In the last five years, the revenue has grown at a CAGR of 12.8% due to strong growth in volume. The net profit also grew at a CAGR of 19.4% due to its integrated nature of operations and captive power sources.

Its RoE and RoCE stand at 26.4% and 30%, respectively. The company also pays consistent dividends to its shareholders.

Financial Snapshot of KPR Mills (2019-23)

	FY19	FY20	FY21	FY22	FY23
Revenue (Rs m)	34,209	33,891	35,663	49,104	62,480
Revenue Growth (%)		-0.9%	5.2%	37.7%	27.2%
Net Profit (Rs m)	3,349	3,767	5,153	8,418	8,140
Net Profit Growth (%)		12.5%	36.8%	63.4%	-3.3%
Return on equity (%)	18.7%	20.2%	21.9%	26.4%	23.6%
Return on capital employed (%)	26.9%	25.2%	28.5%	30.5%	24.6%

Source: Equitymaster

KPR Mill recently announced a capex of Rs 5 bn to modernise its plants.

For the next six months, the company's order book stands at Rs 1 bn, which shows good revenue visibility.

China plus one megatrend, the signing of the free trade agreement (FTA) with the UK and increasing opportunities in the US market create a favourable environment in the textile business.

Moreover, with ethanol blending taking the forefront in the government's biofuel push, the company's growth prospects look high.

Going forward, the company's expansion plans and favourable economic policies will drive its revenue and profit growth in the medium term.

To know more, check out KPR Mills' financial factsheet and latest quarterly results.

#5 Aegis Logistics

Last on the list is Aegis Logistics, a leading logistics player.

The company imports, stores, and distributes liquified petroleum gas (LPG), chemical products, and vegetable oils.

It also makes marine products and provides bunker fuels to ships.

Aegis Logistics has a large fleet, including LPG terminals, bulk liquid handling terminals, filling plants, pipelines, and LPG gas stations, which it uses to deliver products and services.

It has a reputed client base, including Shell, Bombay Dyeing, Reliance, HPCL, BPCL, and ONGC.

The company has an operating capacity of 729 thousand kilo-litres (KL) across six ports. To cater to the growing demand, the company has invested in expanding its capacities across all product segments.

Through greenfield and brownfield expansion, the company has added 574 thousand KL of bulk liquid capacity in the financial year 2023.

It also plans to add another 175 thousand KL of bulk liquid and 100 MT of gas capacity with a capex of Rs 12.5 m.

Moreover, the company plans to add new products to its basket and explore growth opportunities in renewable energy by leveraging its joint venture with the world's leading tank storage company (Vopak).

All of this shows that the company is geared up for growth. The success of joint ventures and expansion plans in the past is clearly reflected in its financials.

In the last five years, the revenue has grown at a CAGR of 8.9%, driven by strong volume growth in the liquid, gas, and LPG segment. The net profit also grew at a CAGR of 15.2% during the same time.

The RoE and RoCE stand at 17.7% and 22% respectively.

Its five-year average dividend payout and five-year average dividend yield comes to 36.4% and 0.7%, respectively.

Financial Snapshot of Aegis Logistics (2019-23)

	FY19	FY20	FY21	FY22	FY23
Revenue (Rs m)	56,261	72,161	38,803	46,697	88,140
Revenue Growth (%)		28.3%	-46.2%	20.3%	88.7%
Net Profit (Rs m)	2,521	1,340	2,492	3,849	5,110
Net Profit Growth (%)		-46.8%	86.0%	54.5%	32.8%
Return on equity (%)	18.1%	8.8%	12.9%	17.7%	16.2%
Return on capital employed (%)	22.7%	15.3%	17.2%	22.0%	17.3%

Source: Equitymaster

Going forward, its expansion plan and growing demand for LPG will drive the revenue and profit growth in the medium term.

To know more, check out Aegis Logistics' financial factsheet and latest quarterly results.

Snapshot of top emerging bluechip companies on Equitymaster's Indian stock screener

Here's a quick view of the above companies based on their financials.

Please note that these parameters can be changed according to your selection criteria.

This will help you identify and eliminate stocks not meeting your requirements and emphasise those stocks well inside the metrics.

A word of caution...the above-mentioned companies have strong fundamentals and business with bright growth prospects. But one cannot simply ignore that they've also had their fair share of volatile periods.

If you plan to invest in a company, assess the fundamentals and prospects of the business. Sustained research must not be compromised despite the positive odds.

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...