Top 5 Multibagger Growth Stocks to Watch Out in 2024

In December 2021, the Federal Reserve indicated that they would raise interest rates in 2022, along with tapering the flow of cheap capital.

This triggered a free-fall across certain asset classes (tech stocks, bitcoin, etc.) and one category of stocks that was hurt the most was growth stocks.

The fastest growing companies lost significant percentages of their market cap over the next two months until they stabilised.

You see, emotions run high at the extremes of markets. It's very important to remain prepared during these severe price movements and continue to focus on the future, while also understanding the past.

As things stand now, certain data points suggest that we are nearing the end of rising interest rates cycle.

Many banks have started reducing fixed deposit rates while the Reserve Bank of India (RBI) has already paused the benchmark repo rate for the third consecutive time in the August 2023 meeting.

No wonder growth stocks are on the rise.

Let's look at the top growth stocks that have already doubled in 2023.

#1 IRFC

First on the list is the financing arm of Indian Railways - IRFC.

You would be aware that railway stocks are all hype these days and any news involving a big order book can take its stock price for a wild ride.

This is exactly what's happening with IRFC.

The Indian Railways' is reportedly planning to roll out a substantial Rs 250 bn tender. Its objective is to secure a fleet of 60,000 wagons during the upcoming July to September 2023 quarter.

This is a major procurement order, expected to boost the revenue and profit of IRFC, which finances the purchase of railway assets.

No wonder shares of the company have already rallied 122% in 2023 so far.

The Railway Ministry is also aiming to manufacture trains to export to markets in Europe, South America and East Asia by 2025-26.

As per the Railway Ministry, by FY26, India plans to export standard-gauge Vande Bharat trains. The plan, if realised, will place India on par with eight countries that have the capability to manufacture trains with speeds of 180 kmph or more.

IRFC's strong balance sheet size with nil gross NPA, low overheads, and the Indian Railways' huge capex needs bode well for the company's growth prospects over the long term.

Being the primary financier for Indian Railways, the company will continue to get significant business over the coming decade. Especially since Indian Railways plans to make huge investments in expansion and modernisation of the network.

The company is also planning to diversify its financing portfolio. This evolution will encompass new dimensions of railway projects, notably dedicated freight corridors, high-speed rail initiatives, and the development of smart railways.

Going forward, the stock could experience some volatility as and when the government decides to sell a partial stake in the company as part of its divestment plans.

Speaking of IRFC, Co-Head of Research at Equitymaster Rahul Shah recorded a video recently, discussing whether the market is being too optimistic about IRFC, or if the gains are justified.

#2 Polycab

Next on the list is Polycab.

The company is one of the largest manufacturers of cables, wires, and allied products.

It also has exposure in segments including fast-moving electrical goods (FMEG) such as fans, switches, LED lights, solar inverters, and pumps.

In 2023 so far, shares of the company have gained 101%.

As can be seen from the above chart, the company's shares have seen a steep rally since mid-June. This rally can be attributed to its stellar Q1 results.

After reporting the highest ever PAT in FY23, the company started Q1 on a strong note as revenue during the quarter spiked 42% YoY to Rs 38.9 bn.

Meanwhile, net profit rose to 4 bn, a growth of 82% YoY as low input costs and product price revisions improved its margins by 2.8%. The company could continue the good performance in the coming quarters too as last year's merger effect will result in additional revenue generation.

Last year, the merger of Heavy Duty Cables (HDC) and Light Duty Cables (LDC) unlocked significant value for Polycab through incremental cross-selling revenue and enhanced efficiencies across the sales, supply chain, and operations.

The company has also entered the EHV market. India's growing power demand, especially in Tier 1 and 2 cities and smart cities, is fueling the need for High-Voltage (HV) and Extra-High-Voltage (EHV) cables.

Going forward, its continued focus on FMEG business and market dominance could support revenue and profit growth.

#3 Power Finance Corporation

Next on the list is Power Finance Corporation (PFC).

With today's 7% rally, the stock has now generated more than 100% returns in 2023 so far.

PFC is the nodal agency for funding power projects in the country. It provides funds to power generating companies for their capex needs and to distribution companies for their working capital requirements.

It has around 70% market share in the power lending market.

In FY23, the company generated the highest ever profit of Rs 211.8 bn on the back of strong growth in its loan book.

During the pandemic, the company saw a dip in its loan book due to subdued demand in the power sector. But as momentum picked up throughout the sector, the company was able to register 13% growth in loan book in FY23.

Asset quality also improved on the back of PFC's continuous effort in resolution of stressed assets. The net NPA ratio came down to 1.03% in FY23 from 1.60% in the previous year.

The company is also lending to the infrastructure sector now.

In addition to being attractively priced, power stocks like PFC also have a long history of rewarding their shareholders with dividends. In PFC's case, the dividend yield is as high as 5%.

The company's board also recently approved a bonus issue of equity shares in the proportion of 1:4.

Going forward, with the drive towards automation and electrification, the demand for power is expected to grow at a pace not seen before.

Power producers will need to borrow to meet this growing demand by expanding capacity. And PFC could be a big beneficiary of this trend.

#4 Jindal Stainless

Next on the list is Jindal Stainless.

The company is one of the largest manufacturers of stainless-steel flat products used in a variety of industries like automobile, railways, construction, consumer goods, etc.

In 2023 so far, shares of the company have rallied 101%.

Given that the company manufactures dynamic and diversified products, it has a competitive advantage in the segment it operates and caters to various sectors.

For example, Jindal Stainless played a role in the success of Chandrayaan-3 program as it was a supplier to Indian missile programs and satellite launch vehicles.

On top of that, it has a massive capex lined up which can further support revenue and profit growth. The company expects a capex of Rs 32-33 bn in the ongoing financial year 2023-24, with most of it likely to be funded through internal accruals.

Its revenue has seen a sharp growth in the past couple of quarters driven by growth in domestic markets and government infrastructure projects.

Recently, the company also completed the acquisition of its subsidiary, which experts believe could result in improved synergies between both the companies.

#5 RVNL

Last on the list is Rail Vikas Nigam (RVNL).

The company is engaged in the business of implementing various types of rail infrastructure projects assigned by Ministry of Railways.

In 2023 so far, shares of the company have zoomed over 125%.

As visible from the chart above, shares of the company saw a steep rally in April 2023. Back then, it received an order of 120 trains for the Vande Bharat project from the government of India.

Since then, a lot of positive developments in the railways sector have kept the company's stock price on a roll. The company is actively bidding for several rail and metro rail projects in India.

Apart from India, the railway company is also expanding presence in global markets. During the financial year 2023, it entered overseas markets and signed an MoU with Kyrgyzstan for an order worth approximately Rs 180 bn.

It is planning to expand its overseas presence and take up projects in several other countries.

Currently, RVNL has a strong order book of over Rs 650 bn, focusing on railway, metro, and overseas projects.

The company is confident in its ability to execute projects and maintain positive growth, targeting an order book of Rs 750 bn to Rs 1 tn.

Going forward, the company's margins could improve as the huge order book gets executed.

Conclusion

Growth stocks often exhibit exceptional growth rates and carry the potential for remarkable future expansion.

However, it's important to understand that these expectations driving them higher could fizzle out sooner than you think due to whatsoever reasons. It could be poor quarterly results or some unexpected event.

Sometimes, growth stocks are driven by pure expectations, and you can imagine what might happen if these expectations are not met. Like penny stocks and microcap stocks, growth stocks make the stock market volatility look tame.

In the case of the five stocks mentioned above, let's just hope that the recent rallies aren't the biggest bear trap in history.

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...