ETMarkets analysed the results of BSE500 companies in FY24 and found that about 45 companies have consistently maintained profit margins of at least or over 25% throughout the year. Out of these, 9 companies have delivered multibagger returns to investors in the last one year period.
A profit margin is a key indicator to measure how much money a company keeps as profit after paying for its costs. A high profit margin of 25% or above is a sign that a company is doing well financially, making it more attractive to investors.
The 9 multibaggers which saw sustained higher profit margins include Motilal Oswal, Tata Investment, Hindustan Zinc, REC, The Phoenix Mills, among others.
Out of the above filtered pack, Motilal Oswal has delivered the highest returns of 274% in the last one year period. The company has reported a PAT margin of over 30% consistently in the last four quarters.
In any top performing companies or stocks list, a Tata group firm usually finds its place in the mix. Tata Investment Corp, an NBFC and investment manager, nearly tripled investors’ wealth in the reporting period. The company has reported profit margins of up to 88% in FY24, making it one of the attractive investment opportunities in the list.
Technically, the stock is trading above key moving averages like the 20-day and 50-day SMA. And momentum readings like the 14-day RSI are in rising mode and not overbought, which augurs well for the intermediate uptrend to continue.
Subash Gangadharan of HDFC Securities has recommended a buy on the stock at Rs 6,731-6,600 levels for target of Rs 7250 in the near term. Investors can place a stop loss at around Rs 6,350.
Another notable name in the list is Hindustan Zinc, whose shares have doubled in the last one year period. The company posted profit margins of 27% in at least two quarters of last financial year with the margins being over 25% for the rest of the two quarters.
The recent rally came on the back of silver prices, which hit fresh record highs in the recent past. For Hindustan Zinc however, silver is a by-product and any price rise simply adds to its bottomline.
“The future outlook of silver continues to look bullish and the stock is being seen as a play on silver,” said Sunny Agrawal, Head of Fundamental Equity Research, SBI Securities.
Other companies in the list include Power Finance Corp, which clocked a PAT margin of up to 31% in FY24 and REC, which saw margins of up to 32%.
What should investors do?
Even though Indian markets are trading near all-time highs, there is no correction in sight because there are no triggers for a slide, according to analysts.
However, investors are advised to move their portfolios towards the defensive and largecaps.
“I think there is still some sanity of valuation when it comes to largecap holdings. The large banks, the large IT companies, the large pharma companies, they are still in that ballpark figure of 15 times to 30-35 times trailing 12-month price to earning multiple. Similar businesses in midcap and smallcap are 30, 40, 50 times PE multiple which is a bit unreasonable. So, I think that tilt has to be more towards largecap stocks and that is where we are trying to drive our money and/or that of our clients,” said Dipan Mehta, Director, Elixir Equities.
“Navigating a market near all-time highs requires a balanced approach. A diversified allocation across market capitalizations can help mitigate risk. Sectors demonstrating resilience, like Consumer Goods, particularly those catering to rural markets, might be attractive, said Sonam Srivastava, Founder and Fund Manager at Wright Research.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)