Best Multibagger Stocks to Buy Now in India 2024

In this article, we will discuss

• How to Invest in Best Multibagger Stocks
• Best Multibagger Stocks to Buy - Summary Table
• What should an investor look at while picking in this collection
• Multibagger stocks - Detailed profile, pros and cons
• Model Portfolio
• A detailed table with various parameters for Best Multibagger Stocks to buy

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How to Invest in Best Multibagger Stocks

Multibagger stocks are equity shares of a company which generate returns multiple times higher than its associated cost of acquisition. These stocks were first invented by Peter Lynch, published in his book ‘One Up on Wall Street’. These are essentially stocks that are undervalued and have strong fundamentals, thus presenting themselves as great investment options. A stock that doubles its price is called two-bagger while if the price grows 10-times, it would be called a 10-bagger. Thus, multibaggers are stocks whose prices have risen multiple times their initial investment values. Investors looking to build capital with decent risk appetite aim to get their hands on multibaggers. But the catch is- a multibagger is a multibagger only in hindsight. At first, it may look like a risky undertaking in an overstimulated market environment. We are referring to multibaggers as stocks which multiply or provide avenues for phenomenal wealth creation. The wealth creation could happen over a long horizon of time through compounding gradually and necessitates a patient investor’s mindset.

The reward for an investor from a multibagger bet is by putting serious capital at work. However, serious investing happens only when the investor has understood a company’ business model, risks to growth, market potential thoroughly and has invested at sane entry valuations, willing to wait for a business to grow its earnings in the future years. A great example of a multibagger is HDFC Bank, which has completed 27 years in 2023 since its IPO in 1995. Without dividends reinvested, the stock has delivered a return of 25% CAGR, whereas with dividends reinvested it is 30% CAGR. An investment of 1 lac in that IPO is worth Rs 8 crore today, which means the price has grown 800 times, making it an 800-bagger. Some popular multibaggers in Indian stock markets in 2020 were Caplin Point Laboratories which returned 22,300 percent in ten years; La Opala RG rising 4500 percent in the previous decade; or Garware Technical Fibres that has returned 2600 percent in the last ten years.

Best Multibagger Stocks to Buy - Summary Table

Watch our video on best Multibagger Stocks

Multibagger Stocks - What should an investor look at while picking in this collection

• Size of the company: The size of a company has a great deal to do with what you can expect to get out of the stock. How big is this company in which you have taken interest? Specific products aside, big companies don't have big stock moves as they are already quite stable. In certain markets they perform well, but you can expect the biggest moves in smaller companies who are growing at a faster pace than their larger counterparts. You don’t buy a stock in a giant such as MRF to quadruple your money in two years. For a TCS to double or triple its size is a mammoth task in the foreseeable future.
• Healthy Earnings Growth: A shareholder earns when the company makes profits. When you look at the earnings of a multibagger stock, you will typically find high growth in the earnings of the company due to its revenue growth model, profitability model and also capital allocation model.
• High Margin Businesses: Another simple answer to the question – how to identify multibagger stocks is to look for businesses that have high margins. Usually, multibaggers command high margins either due to a lack of competition or some moat, some operational efficiency or because they command a leading position in the industry. Moreover, these stocks tend to have a sustained margin over time that doesn’t fluctuate every quarter or year.
• Future Growth Potential: A company may not be able to make money if it doesn’t have a comprehensive range of products or services as the markets are very dynamic in the current scenario the world over. One of the characteristics of a multi-bagger stock is that the management is very vocal about its vision and is able to explain the steps being taken to achieve the same.
• Competitive Advantage: This is one of the best ways to identify multibagger stocks in India. A company can stay in competition by offering better services and products as it grows. For example, Madras Rubber Factory (MRF Ltd as it is now known as) was started by a small town balloon toy manufacturer, and the company has been improvising its products and services as per the demand of the customers. This zeal to keep innovating and tweaking or diversifying their offering as per demand has given them a competitive edge over contemporaries and kept them going strong over the years. To spot whether a company possesses a competitive advantage, see how innovative they have been. You can do so by taking a look at the patents they have, how active their R&D wing is, and how frequently they launch innovative products and services.
• Capability to expand free cash generation: Most important feature of sustainable multi-bagger stocks has been the ability to generate free cash flows consistently and the ability to grow them. Multi-bagger companies usually use their internal funds to expand or launch new products. These companies also tend to have lower debt levels against equity. These companies tend to generate free cash flow (which is computed as cash flow from operations minus purchase of fixed assets). This cash flow is to be used to fund future expansions or pay dividends.
• Return ratios such as ROE and ROCE. Both these ratios are used to measure the efficiency with which a company can generate profits. These are important measures which should be compared with industry peers as well, to pick the best player. the trend of these ratios should be looked at to see if  they are improving or not.
• Mispriced opportunities: Business is grossly undervalued due to investor ignorance or being out of flavour. Ex. Some of the consumer stocks in 2007

Now let's look at the potential multibagger stocks in our model portfolio.

Multibagger stocks - Detailed profile, pros and cons

Himadri Speciality Chemical Ltd.

Himadri Specialty Chemical is primarily engaged in the manufacturing of carbon materials and chemicals. It is the No.1 coal pitch manufacturer in India and is the only company to manufacture advanced carbon material in India. It is also the largest player of Naphthalene and SNF in India.

HSCL Acquired:

Sicona - Sicona is an innovative Australian startup specializing in high-capacity silicon anode technology for lithium-ion batteries. 

Invati Creations- Invati, has a strong focus on engineering Lithium-ion electrode materials for efficient energy storage with higher energy density and longer battery life and using groundbreaking nanotechnology biosciences to provide real-world solutions

It along with Resolution Applicant - Dalmia Bharat Refractories Limited (DBRL) participated in the corporate insolvency resolution process of Birla Tyres Limited and acquired it at Rs. 306 crores whose replacement cost is estimated to be Rs. 3,400 crores.

The market cap of the company is Rs. 23,000 crores, the revenues grew 26% and PAT by 42% YoY in Q1FY25. The ROCE & ROE stood at 19% and 16% respectively

Federal Bank

Federal Bank is a private-sector bank which is headquartered in the state of Kerela. The bank has operations in retail banking, wholesale banking, treasury operations & other banking services.

Credit Growth to sustain: In Q4FY24 the bank witnessed healthy advance growth of 45% YoY. This level of credit growth is one of the highest amongst its peers. Growth going forward in this segment is positive for its net interest margins (NIM).

Still scope of NIM improvement: In Q4FY24 the NIM of the bank stood at 3.21%. Cost of Deposits and cost of funds are sloping upwards because of which the NIMs are under pressure. With higher credit growth, a gradual shift towards margin accretive loan book, and a high EBLR linked book the margin expansion could keep on witnessing a gradual rise.

Asset quality Stable: In the latest quarter Q4FY24, the bank’s GNPA and NNPA were at 2.13% and 0.6% respectively. The provision coverage stood at 71.08%, while the Slippage ratio was at 0.68%. With the macro environment stabilizing the worst of the asset quality is behind us, no random shocks are expected in this segment. Continued loan growth improvement, margin expansive product mix, stable asset quality, better digital capabilities & a helpful macro situation are strong tailwinds for the company. The market has appreciated the bank’s performance which has resulted in a good price appreciation of the stock. We believe the next leg of re-rating would take place with a sustained improvement in its quarterly performance.

Varun Beverages Ltd

Varun Beverages (VBL) is one of the Largest franchisee of PepsiCo in the world. The company has been associated with PepsiCo since the 1990s and has a three-decade strategic partnership with them. The Indian Carbonated Soft drink industry is majorly controlled by two players which are Coca-Cola & PepsiCo. This industry is expected to compound at 8.8% to reach a size of around ~INR 1.5 trillion. Further, the per capita consumption of Carbonated drinks stands at around 22 liters which is way lower than that of peer countries like Vietnam and the Philippines. The branding and the marketing of the company’s beverages are handled by Pepsi-Co. Whereas the distribution and supply chain is managed by VBL.

The company is also rapidly growing its other segments. The Sting Energy drink in a quick span of time started contributing a significant chunk of revenues.The Sales Volume Breakup Q1FY25 stood as follows: CSD - 76%, Juice – 8%, Water - 16%.

As of Q1FY25, their operations span 10 countries with franchise rights and 4 countries with distribution rights. In FY24, 3 territories in the Indian Subcontinent (India, Sri Lanka, Nepal) contributed ~83% to revenues; 3 territories in Africa (Morocco, Zambia, Zimbabwe) contributed to ~17% of total revenues.
Consolidation - In March,24, they consolidated the franchised territories of South Africa, Lesotho & Eswatini and the territories with distribution rights in Namibia, Botswana, Mozambique and Madagascar

Torrent Pharmaceuticals

Pharma co. dealing with mostly Branded generics (~73% Sales), and in Cosmetic Dermatology. Torrent is the 8th largest domestic player in the IPM. Over the years it has successfully acquired domestic businesses of Elder Pharma, Unichem labs and recently Curatio.

The market cap of the company is Rs. 1,12,000 crores, despite being such a large company it recorded a sales growth of 10.5% and a PAT growth of 20.9% on a YoY basis in Q1FY25.

Apart from the size of the company, other key things that draw attention on this company making an investable company-

• Significant rise in Free Cash Flows from negative of Rs. 174 crs in 2022 to Rs. 319 crs in 2024.
• Improved Working capital days and cash conversion cycle (CCC from 74 in 2023 to 58 in 2024). Thus, improving the overall efficiency ratios.

Model Portfolio

In order to get exposure to the best Multibagger stocks, you need a total of Rs 26048.6 for the below-curated portfolio as on August 9, 2024.

A detailed table with various parameters for Best Multibagger Stocks to buy

Our Collection of Best Stocks to Buy You can check the live prices and trade India’s best large cap stocks at the lowest brokerage with SAMCO, India’s leading discount brokerage.

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