2 days back we released a detailed report (24 pages) on a very good stock for investment for our Alpha and Alpha + members and would like to share with you details on the same.
If you are a smart investor and like to invest in leading companies in their respective industries, businesses with strong entry barriers and very good long term growth prospects, then as you will realize on reading the below details, our latest stock recommendation (Name of the company – P*******s) is one of those companies.
Details on Alpha recommendation
The company that has been chosen for recommendation is among top 3 companies in India in its area of operations and it has achieved the same on the back of high quality products, pan India distribution network, strategically located manufacturing facilities and good investment behind the brand in the form of celebrity endorsements.
The company has more than 5 manufacturing units spread across the length and breadth of India and the units are strategically located closer to ports for easier access to raw materials. On the back of very good demand and in order to sustain 25% + growth momentum for the next few years, the company recently expanded its capacity at various units and all have been commissioned.
Entry barriers – We like companies in industries with strong entry barriers as it limits the competition and enables the industry leaders to generate sustainable high returns on capital for long periods of time.
Our latest stock recommendation derives its competitive advantage from regulatory licenses and difficulty in sourcing raw material and these two factors render significant advantages to incumbent players and deter new competitors from foraying into the industry.
Strong growth prospects – The Company is already a leading branded player in its industry and accounts for more than 1/4th of the overall organized market.
However, it is important to note here that of the total industry size (~20,000 crores) the share of organized players is still 30%, though it has increased from 10% a decade back. As is being witnessed in other industries, the share of organized players is expected to inch up further from 30% and if GST is implemented then the gain in market share will be much faster. With strong entry barriers (Govt. licensing and difficulty in sourcing raw material) the existing organized players will be the key beneficiaries of the shift towards branded products.
Operating performance – Let’s look at how the company has performed in the last 10 years as the competitive advantages should reflect in numbers as well:
- 10 years sales growth – 25% + CAGR
- 10 years EBITDA growth – 30% + CAGR
- 10 years PAT growth – 25% + CAGR
- Avg. Return on equity – 20% +
- Dividend payout – 25% +
- Promoter holding – 60% +
As discussed above, we believe the company is at the cusp of very strong growth for the next 4-5 years and you should definitely consider investing in the same.