Top 5 long term stocks to add to your watchlist

With careful analysis, these market fluctuations can potentially be capitalized on.

First understand this. There is a certain level of uncertainty in every investment. There is the potential to make a profit or experience a loss, whether you are investing in stocks, real estate, bonds, commodities, currencies, or cryptocurrencies.

If you don’t like uncertainty, then long term stock are your best bet. They stabilize your portfolio with good returns.

The following five stocks boast strong fundamentals and trading acumen.

Operating in diverse sectors, these companies offer exposure to diverse industries and markets and demonstrate promising potential for long-term growth.

have a look…

#1 Varun Beverages

First on the list of long-term companies is soft-drink giant Varun Beverages.

Varun Beverages manufactures, sells and distributes soft drink products under the brands and trademarks owned by PepsiCo.

These include both; Carbonated and non-carbonated drinks. The company operates on a franchisee model and has licenses for 17 states and two union territories in India as well as a few international markets.

Offering end-to-end execution capabilities ranging from manufacturing, distribution and warehousing, customer management and go-to-market execution, Varun Beverages encompasses everything, while PepsiCo provides brand, focused and marketing support.

The business has done exceptionally well in the last five years. While revenue has doubled in value over the past 5 years, profitability has increased by 74.8% on a 5-year CAGR (Compound Annual Growth Rate) basis.

It has projected return on equity (RoE) to increase from 15.9% in FY2018 to 33.7% in 2022.

This stellar performance of the business came on the back of market share gains and improvement in contribution from non-carbonated beverages and has allowed the company to maintain a healthy balance sheet.

The company’s debt-to-equity ratio has fallen from 1.5x to 0.82x over the last five years and the current interest coverage ratio is 3.2x.

Despite being in the industry for more than three decades, the company is continuously expanding its capabilities to meet the high demanding expectations. This includes greenfield expansion in the states of Rajasthan and Madhya Pradesh as well as brownfield expansion at six plants in India.

Going forward, the company plans to drive growth by expanding its market share across categories through various customer push strategies in licensed areas.

The promoter holding is set to be as high as 63.9% by March 2023.

Varun Beverages stock is available at a price-to-earnings (PE) of 62x, which is a slight premium of 12% to its 10-year PE of 55x.

#2 Divi’s Laboratories

Next on the list is Divi’s Laboratories.

Divi’s Laboratories is a leading manufacturer of APIs, intermediates and registered starting materials. It enjoys a strong presence in diverse markets across developed, emerging and developing countries, exporting products to over 95 countries.

The pharma giant has a broad portfolio of over 160 products spread across therapeutic areas, including anti-inflammatory, analgesic and antidepressant drugs. It operates six multipurpose manufacturing facilities and three R&D centres, with the aim of expanding them further.

plan to invest more 10 billion in the construction of a new manufacturing facility which is likely to start operations in the next three years.

In addition, Divi’s Laboratories also plans to invest in new technologies such as vapor-phased chemistry, continuous flow chemistry, photochemistry, gadolinium compounds, and peptides.

It’s also expanding the scope of its APIs and foraying into something called the Contrast Media API, which helps make structures and fluids in the body clearer during scans.

In the past five years, Divi’s Laboratories’ sales and net profit have doubled and tripled, respectively. Strong demand for bulk drugs and expansion in export markets have helped the company grow its business.

This strong growth has driven up the return metrics over the years. RoE to increase from 14.8% in FY2018 to 25.2% in 2022.

The API manufacturing segment is the cash cow of the business, which has allowed it to reward its shareholders with consistent dividends. It has also helped in keeping the balance sheet pristine despite heavy investments.

The promoter holding remains comfortable at 51.9% till March 2023.

The stock is available at a PE of 34.3x, which is close to its 10-year average PE of 31.7x.

#3 SRF

Third on the list is SRF.

SRF is a chemical group that manufactures industrial and specialty intermediates.

Leading the market in most of the segments, its portfolio extends to fluorochemicals, specialty chemicals, packaging films, technical textiles, and coated and laminated fabrics.

Owing to its vast experience in Fluorine, it is the sole producer of some of the major refrigerants in India.

These characteristics bode well for the business, allowing it to grow rapidly over the past ten years.

Sales and net profit grew at a 10-year CAGR of 12% and 17.4%, respectively. ROE has improved dramatically from 13% in fiscal 2018 to 24% in 2022.

This robust growth in turnover has been driven by strong domestic demand, increasing import substitution opportunities and strong growth in exports.

Now, the active support of the government under the ‘Make in India’ initiative also augurs well for the chemical business.

SRF continues to expand its capacity, spend more 15 billion per annum on capex to meet the growing demand. And now, it is planning to spend more than 30 billion in the financial year 2023-24.

Recently, the company approved the Capex 6 billion for four new plants in the agrochemical space and capacity addition to existing plants in Dahej, India.

These projects are part of the company’s overall expansion strategy in the specialty chemical segment and are likely to be completed in the next 10-12 months.

As of March 2023, the promoter holding in SRF is at a satisfactory level of 50.5%.

SRF’s stock has been volatile in the past, yet it trades at 33x, which is a 50% premium to its 10-year average PE of 22x.

#4 Tube Investment

Fourth on our list is Tube Investing.

Tube Investments, a part of the Murugappa Group, is one of India’s leading manufacturers of precision-engineered (64% of revenue in FY2022) and metal fabricated products (22%).

It is also a leading manufacturer of bicycles (14%) in India with a range of prestigious brands and strong market presence.

Tube Investments is expanding the scope of its operations with acquisitions, expanding its global footprint with innovative product streams and exploring new frontiers in emerging technologies.

In 2020, it acquired 50.2% stake in CG Power and Industrial Solutions Limited, a leading manufacturer of motors, transformers, switch gears and railway parts.

This acquisition was a significant step for the company, increasing its scale and scope of operations.

To meet the growing demand, Tube Investments will continue to expand its business across business segments.

Recently, the company approved capacity expansion plans at its large-diameter precision steel tube manufacturing plant near Chennai.

The project is expected to be commissioned in 2024 and will increase the plant’s capacity from 4,125 metric tonnes/month (MT/month) to 5,950 MT/month. The total capital outlay is around Rs. 1.4 billion, financed entirely through internal resources.

The business has been growing, expanding organically and inorganically over the past five years. While the sales grew at a CAGR of 21%, the net profit registered a growth of 41%.

This phenomenal growth in business has helped the company boost its return metrics, with ROE increasing from 13% in FY2018 to 32% in 2022.

The balance sheet remains strong, with a current debt-to-equity ratio of 0.1x.

The promoter stake in Tube Investments is slightly below the norm of 50%, which stood at 46.2% by March 2023.

Tube Investments is currently available at a premium of 36% to its 10-year average PE of 46x.

#5 Astral Poly Technique

Last on the list is Astral Poly Technic.

Astral Poly Technik is the 4th largest pipe manufacturer in India. It operates at a total installed capacity of 282, 338 MT per annum and is present in North, West and South markets.

Apart from manufacturing pipes, the company also has adhesives and sealants segment, which contributes 21% to the top line.

The company has expanded its pipe capacity at 22% CAGR as it entered and acquired various companies under its adhesives business.

In the last 5 years, the company has registered a revenue CAGR of 15.6% and a net profit growth of 27.1%. The 5 year average RoE is 24.7%.

The robust growth has been attributed to its extensive capacity addition combined with strong distribution network.

In addition, the industry’s transition from plastic to chlorinated polyvinyl chloride (CPVC) pipes has also contributed to the company’s well-positioned position.

This has transformed Astral into the fastest growing plastic pipe producer in the country with 25% (largest) market share in the CPVC segment.

The company has been expanding its presence in the last 2 years. it’s spent 2 billion for capacity expansion and decentralizing its operations. While a part of the newly added capacity is already operational, a majority of it will become fully operational in the next 6 months.

Promoter holding is at a healthy level of 55.9% as on March 2023.

Astral’s stock is currently trading at a PE of 99.6x, which is 30% higher than its 10-year average PE of 76.3x.

Snapshot of Long Term Stocks on Equitymaster’s Indian Stocks screener

Here is a quick overview of the above companies based on their financial status.

Please note that these parameters can be changed as per your selection criteria.

This will help you identify and eliminate stocks that don’t meet your requirements and emphasize those stocks within the metrics.

in conclusion

Investing in stable, fundamentally strong companies can sometimes allow investors to generate large returns.

it all comes from the ability fundamentally strong companies To avoid short term market fluctuations. But despite the positive odds, it’s important to do your own research.

It’s important to do thorough research, but these 5 long-term stocks can serve as a great starting point for your investment radar.

But there is no reason to believe that the long-term winners of the past will continue to be long-term winners in the future.

Therefore, it is important to monitor their performance, analyze industry trends, and study significant developments. If it is at crazy multiple of earnings then avoid it.

This can help you stay informed and spot potential investment opportunities at the right price to generate substantial long term wealth.

Happy Investing!

Disclaimer: This article is for information purposes only. This is not a stock recommendation and should not be treated as such.

This article is syndicated equitymaster.com