Stock Screener: 14 multibagger stocks with consistently high profit margins

With FY24E EPS of Nifty companies being largely stable with downgrades in commodities and IT offset by autos, pharma and cement following the September quarter result season, many investors are redeploying cash lying in their portfolios to pick consistent performers as valuations look rich in many pockets.

An analysis of all BSE-listed companies with a market capitalisation of at least Rs 1,000 crore shows that there are at least 70 companies which reported PAT (profit after tax) margin of at least 25% in all the last four quarters. Out of them, we have filtered out 14 stocks that have given multibagger returns in the last one year.



Topping the chart is Anand Rathi Wealth whose shares have surged 256% in just one year with the financial services company reporting a 31.6% PAT margin in the last quarter, shows ACE Equity data. In all the previous three quarters as well, the margin has been at least 25%.

Similarly, shares of REC and PFC have also grown over 3 times in one year and also reported a 30-32% PAT margin.

Sanghvi Movers, which runs the largest crane rental company, has reported over 26% PAT growth in all the last four quarters. "Considering the industry tailwind, revival of capex cycle, high earning growth visibility, strong balance sheet and strong cash flow generation. We value the share at 20x FY25E EPS to arrive at a target price of Rs 864," Nirmal Bang said.

Other winners in the list include Suyog Telematics, SG Finserve, KSolves India, SJVN, STEL Holdings, Industrial & Prudential Investment, Summit Securities, Deep Industries, Angel One and Tips Industries.

The net profit margin of BSE500 companies is now at a record high level of around 13% as against the pre-Covid peak of 10%. "While top-line growth continued to slow in Q2FY24, profit margins remain healthy at record highs. Such divergence between margins and top line is unsustainable and shall eventually need to reconcile. Margins are close to those seen in the 2000s when top-line growth was 25%-plus, while the top line is even below that seen in 2010s," Nuvama Institutional Equities said.

Data shows that in the world of small and midcap companies, profit margins are lower than largecaps because they are more geared towards growth.

What should investors do?
At the macro level, global brokerage CLSA has told clients that largecaps are the safest way to ride out the current uncertainty, especially with real rates rising.

"We prefer sectors that have already sold off or underperformed markets. Major bank stocks have underperformed on global fear of asset-quality issues. Bank Nifty has (up 36% since the pandemic) underperformed the Nifty (up 60% since the pandemic). FPI investment in bank stocks is also at a low of 33% compared to 40% in January 2020. This guides our choice of Axis Bank, ICICI Bank and SBI, as well as TCS from the IT sector," said Indranil Sen Gupta of CLSA.

Jefferies, which had raised cash in its model portfolio during the market peak in September, has now redeployed cash as the key macro concerns of higher US yields, rising oil prices and near-term state election results have subsided.

"With the robust earnings performance, Nifty is now 18.8x 1-year forward - higher than the past 10-year average, but relative to EM (excluding China) the premium at 63% is in line with the historical average. Also, on PEG basis, Indian markets appear reasonable. Notwithstanding any big external shock, the current market multiples can sustain given the strong domestic flows," Jefferies said.

The brokerage has a bias towards the capex cycle theme with a specific focus on housing, power sector among other industrial sectors.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)