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* Note :- We have identified 5 Ideas that are safe bets and that can consistently deliver strong
returns for the next 10 years. These businesses have scalable business models, good
managements, strong moats, large opportunity size etc. We believe that the high quality nature
of these businesses essentially makes them safe bets that can compound to deliver 10X returns
over the next 10 years.
• GPL has huge opportunity from the Godrej group’s large land banks across the country. This has benefited the
company as GPL is the developer for all these projects with a PM fee of around 10% with no capital investment.
• GPL in FY2013 had about 83% revenues from residential segment and about 17% from commercial projects.
The highly prospectable residential segment share is likely to increase further leading to better revenues and
profitability over the next 3-5 years.
• GPL has a very strong balance sheet that would help the company to scale up its operations over the next
decade. GPL is one of the few real estate developers that can raise equity consistently.
• With a large opportunity size, Great Management, Share holder friendly business model and attractive
valuations, the stock can definitely be bought with a 10 year horizon for strong Multibagger returns.
• Education business is one of the few sectors that is Recession Proof and Inflation Proof. Within the Education
sector, it is the pre-school segment that offers huge scalability and high return ratios.
• THEAL’s core Pre-School business is a cash cow with strong cash flow from operations derived out of a negative
working capital cycle. The ROCE of its Pre-School centers are upwards of 70%.
• The company’s return ratios can improve further with higher utilization ratios. The company return of incremental
capital employed is exceptional.
• THEAL owns K-12 assets which it plans to monetize by selling its assets which will bring down its asset size
thereby ensuring an asset light business model. With a Good Management, Large Opportunity, Asset light
business model and decent valuations – the stock can multiply multifold over the next decade.
• There are strong tailwinds driving revenue growth in both the segments. Both the segments are a beneficiary of
the Indian consumption boom (Housing, Beers, Soft Drinks, Pharma, Liquor etc).
• HSIL sanitary ware business continues to perform well with strong Margins and Revenue growth. With a strong
line-up of brands and a unparalleled distribution strength, HSIL is well positioned for profitable growth.
• Even though Glass Industry has a concentrated structure, HSIL is able to pass on costs only with a lag and
hence this business has performed badly in the last 7 quarters. With the oversupply in the market subsidizing, we
believe that this division can get back to steady state ROCE’s of 15%.
• HSIL’s capital allocation to its retail subsidiary (EVOK) and inorganic growth has been a concern. The stock’s
current valuations prices in the negatives with a strong potential for upside going forward.
• Bajaj Electricals has a slew of brands and an unparalleled distribution network across India with the maximum
penetration across Tier-1,2 and 3 centers. It follows a Asset light model in which manufacturing is done by its
vendors and the company only does marketing, sales and distribution. This leads to extremely high ROCE’s of as
much as 80% and also provides the much needed flexibility to its operations.
• Bajaj Electricals is one of the few successful multi-product companies in which its among the Top-3 in all the sub
segments it operates in. Company has still a lot of potential to grow its product portfolio.
• Bajaj Electricals E&P segment is showing significant signs of turnaround. With a new management in place and
the company’s focus on receiving high margin orders, Bajaj Electricals is well positioned to show a market
improvements in its Earnings. With a turn around in E& P segment, the market would focus on the underlying
value of its consumer segment and assign it a much higher multiple.
• The company has a very Robust Clientele and best part is that, most of it are Repeat Clientele which
speaks volumes about Service quality. Account Mining and New Accounts are significant opportunities for
expanding the company's Business.
• The biggest problem in this sector has been the differentiating Factor between various vendors and we believe
that this company through its Efficient Operations/ Technology backbone/ Processes has been able to carve out a
Niche for itself and has also scaled up operations significantly.
• Company in spite of growing in size, has been consistently improving its Return Ratios. Currently its Return on
Equity is > 50% and ROIC > 100% which is very rare. Management’s capital allocation skills are credible.
* Note :- We have also identified 3 Quality cyclical stocks that can deliver exceptionally strong
returns in case of a strong Government at the centre. These stocks are extremely undervalued
and are good bottom-up stories. These 3 Ideas can deliver multiple time returns during a good
economic cycle backed by earnings growth as well as valuation re-rating.
• Company is present in the entire value chain in the water business thereby providing a one stop solution. The
company owns about 100 patents and this technological expertise differentiates the company from its competitors
and enables it to prequalify for high tech projects apart from being cost competitive in bidding for projects.
• The company has huge opportunity in the desalination space which has not only been cost effective but also
takes care of the need for clean water which has become a basic necessity. The rise in income levels have
created awareness among the people for safe and clean drinking water which has resulted in a huge spending by
the government. The company’s overseas subsidiaries performance has been robust with order book rising from
Rs.10.6Bn in FY10 to about Rs.14 Bn in FY14 thereby diversifying their business.
• With a professional Management team, Huge opportunity size and Global presence, the stock is definitely well
positioned for strong returns going forward.
• The company’s shift to high value add businesses such as express and supply chain solutions will structurally
improve its Margins and Return ratios. ROCE’s in these 2 segments are higher than 25% and hence the company
would continue to improve % of revenues from such operations.
• TCI has abut 10mn Sq.Ft of warehousing space, 7000 trucks, 6 Cargo ships and 14000 delivery points across
India. It moves almost 2.5% of Indian GDP. The scale of operations that the company has achieved is a big
competitive advantage on which it is building these high margins services.
• With a fledgling E-Commerce opportunity, the cope for growth is huge. As Indian economy organizes itself, the
potential to grow as a large logistics player is huge and hence the interest from several smart Investors such as
Mr. Radhakishan Damani.
• SML undertakes implementation of turnkey projects, including providing of well maintained equipments, expert
technical services and skilled manpower. The company has a very good track record in terms of the work that they
do and the client list contains some of the most reputed names. The company has a near monopoly in the
segment of 100 tonnes and above.
• With Infra sector likely to be the focus of the new government we expect this company’s business and profits to
improve manifold over the years. With a new investment cycle, Sanghvi movers would be one of the biggest
beneficiaries of the same.
• The stock is currently available at extremely cheap valuations and we believe that the intrinsic value of the stock
is upwards of 200 Rs/ Share.
* Note :- The 2 – high yield stocks that we have mentioned in this write-up have a dividend yield
of over 7%. We believe that the current level of dividends in these 2 companies will not only
sustain but also grow over the next 5 years. These stocks not only provide variety to your
portfolio but also provide the necessary cash flows to re-invest.
• IBHFL has one of the best balance sheets in the Industry with cash and cash equivalents of around 7000 Cr. We
believe that the company is well positioned to grow its Loan book without any equity dilution for the next 4 years.
• The company’s Gross and Net NPA’s have consistently improved during the past four years with Gross NPA’s
reducing from 1.92% to about 0.79%. The company currently has a stable portfolio and in fact generates strong
Return on Equity of around 27% backed by low cost of operations.
• IBHF has a strong dividend track record and has a dividend policy of paying 50% of its profits as dividends. With
continuing improvement in its earnings, we believe that the company would be able to consistently distribute
strong dividends for its shareholders.
• IIML is a Leader in the Private Equity with Strong and Durable Competitive advantages to sustain it going
forward, especially in the Infra and Real Estate sector where it has good Moats from its strong parentage (IL&FS
Group) and strong performance track record.
•The Business Model of the company makes sure that Share Holder's are rewarded heavily and this can be seen
from one of the Best Return on Equity (ROE's) of >50% consistently. These returns can in fact inch Higher with
increased AUM going forward.
• The company has been affected with depressed investor sentiments and hence has not been able to raise
incremental funds. With a turn in cycle and a new government at helm, the company can once again grow.
• The stock is a high Dividend play and would give Stability and Cash Flows for your Portfolio with its Dividend
Yield of > 10.5% at current market prices.