Since stock markets despise uncertainty, Russia’s official invasion of Ukraine, after weeks of maneuvering, has raised concerns in global markets.
Reflecting global sentiment, India’s main stock market indexes, the Sensex and Nifty, fell 10-12% from January highs.
Adding fuel to the fire, looming concerns over sky-high inflation, massive FII selloffs, Fed rate hikes, supply chain disruptions, geopolitical tensions, combined on the upside crude oil prices, have kept the market on edge.
There is no doubt that shock and fear are the main emotions in the market right now. Investors and traders are scared. The feeling took a big hit.
While such corrections cause panic, they also provide long-term investors with a window of opportunity to diversify their portfolio and stock up on quality battered stocks.
Investors are therefore encouraged to use this crisis as an advantage and gradually build up long-term stakes in quality companies.
Here’s Equitymaster’s co-head of research, Tanushree Banerjee in her own words…
Indian markets have been volatile over the past couple of weeks on earnings disappointment, concerns over interest rate hikes, commodity prices and more. The war only added to the uncertainty.
For long-term investors, the temporary uncertainty could be an opportunity to invest in companies that remain strong wealth creators and provide a margin of safety in valuations.
In this article, we list the top 4 fundamentally sound stocks to add to your watchlist.
1. IndiaMART InterMESH
IndiaMART InterMESH, the country’s first and largest business-to-business (B2B) digital marketplace, stands out today as a game-changer in the B2B landscape.
The Company provides B2B and customer-to-customer sales services through its web portal.
It focuses on integrating small and medium enterprises (SMEs) into a fast and easy to use platform.
The company has nearly 60% market share of the online B2B classifieds space, making it the biggest player in the industry.
It has a portfolio of 6 million supplier storefronts, 102 million registered buyers and a total traffic of 748 million recurring users.
IndiaMART recorded consolidated revenues of ₹1.9 billion in the December 2022 quarter, an 8% year-on-year (YoY) growth. This is due to improved achievements of existing customers and an increase in the number of paid subscriptions.
Its profit before tax (PBT) was ₹930 m and the net profit amounts to ₹700 m, i.e. respective margins of 44% and 33%.
Moreover, the company is almost debt free.
It has recorded good earnings growth of 52.1% Compound Annual Growth Rate (CAGR) over the past 5 years.
In recent quarters, the company has undertaken investments in the workforce and talent retention to fuel its growth.
Additionally, he has actively executed acquisitions over the past year. IndiaMART has recently invested in Realbooks, Busy Infotech, Vyapar, Legistify, FleetX and Shipway to add services such as accounting, inventory management, invoicing and logistics solutions.
These acquisitions will allow the company to develop its activities more quickly.
Over the past year, the company’s shares have been under pressure. The counter has corrected by more than 45%.
2. Finance Manappuram
Manappuram Finance is an Indian Non-Banking Finance Company (NBFC) based in Kerala.
It offers a wide range of fund-based and fee-based services, including gold loans, foreign exchange facilities, home loans and commercial vehicle loans.
Manappuram Finance has an extensive branch network of over 3,500 branches spread across 28 states across the country.
Recently, the company reported a string of weak numbers in the third quarter of fiscal 2022. It reported a nearly 46% drop in net profit to ₹2.6 billion against a net profit of ₹4.8 billion in the prior year quarter.
Manappuram’s results were impacted due to the shift from high yielding loans to low yielding gold loans, coupled with increased costs due to aggressive marketing efforts/advertising spend.
To recover a lost share of high-priced customers and compete with peers, the company changed its business strategy and reduced yield, which impacted margin.
Due to this change in business model, the company’s gold loan assets under management (AUM) increased by 9% quarter-on-quarter (QQ), but it is coming in at a slower pace, which impacted on spread and profitability.
However, over the past 5 years, the company has seen good earnings growth of 37.3% CAGR. It also has a strong track record of return on equity (ROE) – 3-year ROE of 26.11%.
The company has a good dividend track record and has consistently declared dividends over the past 5 years.
Over the past year, Manappuram Finance share price is down 35.8% on BSE.
3. IOL chemicals and pharmaceuticals
IOL Chemicals & Pharmaceuticals is a leading pharmaceutical (API) company. It is a major player in the field of specialty chemicals. It serves the domestic market and export.
The Company manufactures various APIs for various therapeutic areas such as pain management, anti-diabetic, anti-platelet, anti-cholesterol and others.
It is the largest producer of ibuprofen with a global share of 35% and the only company in the world to be integrated upstream for all ibuprofen intermediates.
Additionally, the company manufactures various specialty chemicals such as ethyl acetate, isobutylbenzene, monochloroacetic acid, acetyl chloride and others.
Its products find application in industries such as food processing, flexible packaging, pharmaceuticals, chemical intermediates, textiles, inks, paints and pesticides.
Since 2019, the company has experienced a significant increase in profitability margins, mainly due to the expansion of the manufacturing plant amid supply constraints, leading to increased demand for its 2 main products, to namely ibuprofen and ethyl acetate.
Over the past five years, the small-cap pharma company has recorded strong earnings and sales growth of 67.4% and 28% CAGR, respectively.
In addition, IOL Chemicals has recorded dividend growth of 41% per year on average over the past two years.
On the other hand, the company’s margins decreased to 10.7% from 30.7% on an annual basis. Its profits also fell by 65% to ₹400.7 million due to the weak operational performance of the pharmaceutical industry.
However, the company is confident of generating earnings before interest and taxes (EBIT) of 15% on a sustainable basis. Revenue and net income from non-ibuprofen businesses are likely to improve, according to a report.
CEAT, established in 1958, is one of the largest tire manufacturers and one of the fastest growing tire companies in India.
In 2020, CEAT was ranked 35th among the 100 best Indian companies to work for by the Great Place to Work Institute. It has been recognized as one of the best companies in the automotive and automotive components industry.
The company exports to more than 90 countries classified into 7 groups to facilitate operations.
The tire manufacturer has established relationships with major original equipment manufacturers (OEMs) such as Tata Motors, Ashok Leyland, Escorts, Mahindra, Maruti, Hyundai, Kia, Volkswagen, Honda, Royal Enfield, Bajaj, Piaggio, etc. .
CEAT’s major revenue segments include automotive tubes, scrap metal, other operating revenue, and royalties. Currently, the truck and bus category contributes the majority of its revenue.
For the quarter ended December 2022 quarter, the Company reported consolidated total revenue of ₹24.2 billion, down 1.6% from last quarter. He reported a loss of ₹200 m against a gain of ₹1.3 billion in the same quarter last year.
The December quarter results were impacted by high raw material prices coupled with weak demand for replacement tires from carriers.
However, the company has seen good earnings growth of 25% over the past three years. In addition, it maintained a healthy dividend of 19%.
According to management’s comment, he decided to postpone ₹Capacity increase of 7 billion phase 1 truck-bus radials (TBR) over 12 months and the balance ₹5 billion Phase 2 expansion has been postponed indefinitely due to market conditions and revised growth plans.
The company is revising some of its capital expenditure programs. It aims to develop the business in three segments – the two-wheel, passenger car and off-road (OHT) tire segments.
Apart from this, in the two-wheeler (2W) segment, where it claims a market share of around 30%, the company has also achieved a leading position in the electric two-wheeler category with a market share of around 30%. about 60%. It works with all major manufacturers of 2 electric wheels.
How to deal with market corrections?
One of the lessons that the financial markets have taught us is that the only guarantee is “change”.
Just a few weeks ago, stock markets were on the rise, breaking record after record. Whereas today, the whole situation is totally different.
In these volatile times, the editors at Equitymaster agree on one thing…
Do not panic ! The market will come through this phase stronger. Keep your investments for the long term.
To conclude, remember that volatility is likely to persist… in this situation, do not make rash decisions and sell all your holdings.
You could miss a chance to accumulate more if you sell all your holdings when the markets are in a downtrend. This will apply brakes to the composition processconsidered the eighth wonder of the world.
Warning:This article is for information only. This is not a stock recommendation and should not be treated as such.
This article is syndicated from equitymaster.com
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