As the financial year 2023 draws to a close, the stock market has given us some surprise winners and losers. This year was marked by many international and domestic events that affected the markets. Key international events include the continuation of the Russia-Ukraine war, a resurgence of COVID in China, and the collapse of two large US banks. On the domestic side, this was the first year after the pandemic that saw normal operations in all quarters.
As we enter the next financial year, there are a few stocks that have the potential for strong returns. Based on a comprehensive analysis of key data points, management commentary, and expansion plans, we have identified a few stocks that may surprise us in FY24 with higher-than-expected returns.
IndiaMart – Possibility of lending via the platform could be a benefit
IndiaMart Intermesh was one of the first “new-age” tech companies to be listed on the stock exchanges four years ago. It is a B2B marketplace for the procurement of raw materials as well as finished goods. IndiaMart is a market leader, with a 60% market share in the B2B digital marketplace industry. The company’s superior matchmaking engine, robust network (74 lakh suppliers, 16.5 crore buyers, and 9 crore products), and deep understanding of online trade and commerce in India fortify its business moats, enabling it to leverage the structural opportunity in MSME digital adoption.
IndiaMart had a stellar Q3FY24, with a year-over-year revenue growth of 68% at Rs 353.6 crore (in Indian rupees). It is expected to close FY23 with revenues crossing Rs 1,000 crore for the first time. A crucial growth trigger is the company’s exploration of new technologies to facilitate loans and expand offerings for the sellers and buyers on its platform.
Vinati Organics – Capacity expansion and new products add revenue visibility
Vinati Organics is the world’s largest manufacturer of acrylamido tertiary butyl sulfonic acid (ATBS) and isobutyl benzene (IBB), key ingredients that are widely used in the pharmaceutical industry. It is a leading manufacturer of specialty chemicals and organic intermediates with a sustained market presence spanning over 35 countries in the world. The company is expected to close FY23 with record high annual revenues and net profits.
Future growth visibility for Vinati Organics includes expanding its ATBS capacity from 40KTPA to 60KTPA. Integration of its subsidiary, Veeral Additives (VAPL), is likely to contribute Rs. 700 crore to top-line growth at full capacity. Veeral Organics’ production of five niche specialty chemicals will also contribute to top-line growth.
Varun Beverages – Expansion of network to aid revenue growth
Varun Beverages is primarily engaged in manufacturing, selling, bottling and distribution of beverages of PepsiCo’s brand in geographically pre-defined territories as per franchisee agreement with PepsiCo India Holdings Private Limited.
The Indian beverage industry is expected to witness significant growth opportunities in the future with growth in per capita income, accelerated urbanization, an expanding demographic profile, and a rising middle-class population. To tap the opportunity, Varun Beverages has expanded its distribution network to over 3 million retail outlets in calendar year 2022 versus over 2 million in calendar year 2021 and around 2,400 primary distributors versus around 2,000 in calendar year 2021 along with over 9.25 lakh visi coolers (versus 8.4 lakhs in calendar year 2021), over 2,500 distribution vehicles, and over 110 depots.
Large multi-year expansion plans across verticals SRF is a company with diversified verticals that engage in manufacturing, purchase and sale of technical textiles, chemicals, packaging films and other polymers. Chemicals (Specialty + Fluorochemicals) form 43% of overall revenues followed by packaging film (39%), technical textile (15%) and others (3%). The company exports to more than 90+ countries and revenue from international market constitutes 57% of overall revenues while rest is from the domestic market. During the last AGM, SRF has guided for a cumulative capex plan of Rs15,000 crore over FY24-28.Out of this, Rs 12,000-13,000 crore will be directed towards the chemicals business, which accounted for 42% of the total consolidated operating revenues in FY22.
Indian Hotels – G20 Presidency and post-Covid travel big triggers for FY24
Part of the Tata Group, Indian Hotels is primarily engaged in owning, operating, and managing hotels, palaces, and resorts under different brands such as The Taj Palace and Resorts, Seleqtions, Vivanta, and Ginger catering to different segments. The company is all set to close FY23 with its highest ever annual revenues and net profits.
The key reasons for Indian Hotels’ expected FY23 performance include India being one of the fastest-growing major economies in the world, and the boost in occupancies across hotels across the country to accommodate delegates during India’s G20 Presidency. As Covid fears subside, travel has seen an unprecedented growth as people have started moving out after nearly two years of limited movement.
Further growth triggers for Indian Hotels include the addition of another 8,800 rooms in 40 new properties over the next two years, with 70% of the new hotels under management contracts. The post-Covid travel boom is expected to continue in FY24, providing significant revenue opportunities for the hospitality industry.
Disclaimer: The above stocks are based on a study of the expansion plans and future revenue visibility of some of the listed companies. Their actual performance will depend on various factors throughout the year.
ABOUT THE AUTHOR
Ketan Sonalkar (SEBI Rgn No INA000011255 )
Ketan Sonalkar is a certified SEBI registered investment advisor and head of research at Univest. He is one of the finest financial trainers, with a track record of having trained more than 2000 people in offline and online models. He serves as a consultant advisor to leading fintech and financial data firms. He has over 15 years of working experience in the finance field. He runs Advisory Services for Direct Equities and Personal Finance Transformation.
Note – This channel is for educational and training purpose only & any stock mentioned here should not be taken as a tip/recommendation/advice
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