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Sunday, November 7, 2021

How to Identify Stocks with Multibagger Potential?

Important Rules to follow while Picking Multibagger Stocks

Multibagger Small Cap Stocks
During last decade post global financial crisis of 2009, there are numerous companies which have multiplied investor’s capital delivering super-duper multibagger returns. Similarly, there are plenty of companies which have destroyed investor’s capital to almost zero over last 10 years.

Hence, its important to know the basic criteria’s which make a company a right investment candidate with potential to multiply wealth in long term.

Rules to follow while Identifying Multibagger Stocks

Below are the 6 basic rules which we must follow to pick right companies having multibagger potential.

1. Quality management with high integrity

Alignment of management interest with minority shareholders is one of the key parameter. High standard of corporate governance ensures that company is not involved in any wrong doings. Proper and timely disclosures of shareholder related information by the companies build trust over time. Past track record of promoters, disclosures and dividend pay-out history can help us to check on this crucial parameter.


If the management is not honest, will they want to share the goodies with you? No, they will look for the first opportunity to siphon off the profits and pull the wool over your eyes. We have seen how the investors of LEEL Electricals have lost 95% of their capital over last 1 year due to personal enrichment of LEEL promoters by siphoning off company's profit from the sale of its consumer durable division to Havells.

2. High ROE & ROCE – Efficient use of capital

Return on Equity (ROE) measures a company's profitability by comparing its net income to shareholders equity (book value). ROE is a speed limit on self-funded growth (company's profit). That is, a company cant grow earnings faster than its ROE without raising cash by borrowing or selling more shares. For instance, a 15% ROE means that the company can’t grow earnings faster than 15% annually by relying only on profit to fuel growth. ROCE measures the overall returns for all stakeholders and is a relatively good measure of the overall efficiency of the company. A consistently low ROCE signifies that there is something inherently wrong with the business or the company.

Wealth creator stocks usually have very high ROE and the ROCE relative to the rest of the industry. Typically, companies with high ROCE and ROE would also be generating positive free cash flows consistently. Increasing ROE and ROCE every passing year with low / negligible debt on books is one of the key aspect in spotting multibagger stocks.

3. Low Debt and Free Cash Flows

Its important to learn the lesson from financial crisis of 2011 and now of 2019 that companies with high debt simply get slaughtered. While debt is not bad in case if the company is able to borrow at a lower rate and deploy it in its business at a higher rate as the operating leverage works in its favour, however excessive debt with high interest and repayment obligations can crunch the stock in times of downturn. So, as a long-term investment philosophy, it is best to steer clear of high-debt companies.

Episode of stock prices falling liking nine pins in 2019 of ADAG companies (Reliance Power, Reliance Infra, Reliance Com, Reliance Capital), Essel group companies, Jain Irrigation etc indicates how unbearable high debt burden on books can destroy investors wealth in shortest span of time.

4. Asset Light Business Model - No High Capex Requirements

We know the demerits of investing in stocks like Suzlon & GMR Infra which have an insatiable appetite for more and more capital. To feed their perennial hunger, these companies dilute their equity by making FPOs, GDRs & FCCBs resulting in total destruction of shareholders wealth. This is the simple reason why we do not see multi-bagger opportunities from sectors like metals, infrastructure and utilities because of the capital intensive business model which leads to very high leverage and low return ratios.

Companies should be lean and mean requiring minimal capital but generating huge returns with free cash flows which can be used not only to reward shareholders but also to expand business in future. It is not necessary that company should be a zero-debt company as some amount of leverage can actually improve shareholders returns.

5. The Scale of Opportunity & Non-cyclical Business

Multi-bagger stocks are created because they are able to scale the opportunity rapidly. Titan Industries is a great example. In 2003-04, Titan was a small company with market capital of 500 crores. As on date, its a large cap with more than 2 lakh crores market cap. The fact that India is a booming marketplace of 135 crores consumers means that most products and services have a head start at trying to scale up their activities.

One key factor that creates value in the stock market is consistent growth across economic & market cycles. While markets values growth, it also pay higher premium on consistency in growth. Most of multi-baggers of past like Asian Paints, Titan, Page Industries, United Spirits, Marico, Aurobindo Pharma are typically high growth companies in non-cyclical businesses. It is extremely rare to find a multi-bagger in a typical commodity business like steel, aluminium or oil.

6. Valuations & Future Growth Prospects

Most investors are obsessed about valuations, refusing to buy any stock that is expensive. However, one must remember that expensive is a relative term. If a stock is compounding at 25% on an annual basis, paying a price to earning multiple (P/E ratio) of 30 may be very reasonable. A stock like Nestle or HUL, for instance, has always been expensive. However, a great company with an impeccable pedigree may not always be a good stock to buy. This could be due to the fact that most of the triggers are already in the price and future growth potential does not justify the valuations. The PEG ratio (which is PE ratio divided by sustainable growth) is a simple way to measure valuation relative to growth.

But it is equally important to consider other parameters like financial ratios and brands that the company has created which can go a long way in determining potential valuation. A particular company may look expensive to an investor who have a 2 years horizon but may be a screaming buy for investor who wish to hold it for next 5 to 7 years.

There is no guarantee that the above mentioned parameters would always help investors identify multi-baggers, but these parameters will surely help investors to invest in right set of companies and avoiding those which may end up being value destructors. Moreover, we can learn by following key traits of successful investors who have created enormous wealth in past.

Peter Lynch 2 Minutes Drill to Shortlist Potential Multibaggers

The key parameters involved in Peter Lynch’s ‘two minute drill’ are:

1. P/E Ratio: avoid stocks with excessively high P/E
2. Debt/Equity Ratio: should be low
3. Net Cash per Share: should be high
4. Dividend & Payout Ratio: should be adequate
5. Inventory levels: lower the better

Stay away from companies which are being actively tracked, followed & invested in by large institutional investors. News about buy back of shares or internal stakeholders increasing their stakes should be construed as positive.

Checks specific to Fast Growers:

1. The star product forms a majority of the company’s business.
2. Company’s success in more than one places to prove that expansion will work.
3. Still opportunity for penetration.
4. Stock is selling at its P/E ratio or near the growth rate.
5. Expansion is speeding up Or stable

One must judiciously walk the tightrope between the unquestioning belief that made the stock to be held for so long and the fear of the end from nose-diving prices due to a one-off bad year. The key is to always keep revisiting the story & ask some pertinent questions like ‘What would really keep them growing?’, ‘What is their next offering? or ‘Are their products & services still in vogue?’ It is here, that one must track the point of time when the phase 2 of the firm’s expansion comes to an end. This is usually the dead-end for organizations as success is difficult to be replicated. Unless, innovation happens, downfall is imminent & thus, an exit is necessary. P/E of these stocks is drummed up to unrealistically high levels by the madness of crowd towards the end. One must keep one’s eyes & ears open to signs, which mark the end of the road for these fast growers. A great case in point is Polaroid which had its P/E bid up to 50, only to be rendered obsolete later by new technologies.

A sure shot sign of a decline is a company which is everywhere! Such a company would simply find no place to expand any further. Sooner, rather than later, such a company would see its ‘Manhattans’ of earnings reduced to ‘plateaus’ of little or no growth, simply because no space is left to expand further.

1.The quarterly sales decline for existing stores.
2. New stores opening, though results are disappointing: weakening demand, over supply.
3. High level of attrition at the top level.
4. Company pitching heavily to institutional investors talking about what Peter Lynch calls ‘diversification’.
5. Stock trading at a P/E of 30 or more, when most optimistic estimates of earning growth are lower than 15-20%, thus, unable to justify the high price.

Fast Growers, which pay, are ephemeral & one misses them more often than not. It is a High Risk & High Gain Category of Stocks. One must remember along the classic risk & return principle, that when one loses, one loses big! So, if you are in the quest for magnificent returns, a Fast Grower can be your bet provided you know when to bid Goodbye!

Owning Multibagger Stocks which can multiply Investments in Future

The number of small-cap stocks is large and finding a quality stock that can give high returns over a long period is tough even for equity analysts. One reason is that such stocks usually have a short history and are not tracked by many analysts and brokerage houses. Then there are risks such as low liquidity, governance concerns and competition from larger players.

Scores of once small companies have over the years grown big, giving investors a 30-50 percent annual return over 10-15 years and creating fortunes for investors. However, more often than not, we find ourselves at the wrong side of the fence and regret our inability to spot such stocks on time.

Buying Strategy for Small Caps

1. Go for companies with low debt ratio (preferably less than one)

2. A high interest coverage ratio (above 3x) and a high return on equity are big advantages

3. Avoid companies with huge liabilities in the form of foreign currency convertible bonds / external commercial borrowings

4. Look at the quality of the management, its governance standards and how investor-friendly the company is.

5. Mid-cap and small-cap companies can be future market leaders, so be patient with your investments

Those who wish to invest in small-cap stocks should do so only if they have a long investment horizon and tolerance for volatility. Small-cap stocks suffer the steepest falls in a bear market and rise the most in a bull market. An investor should stay invested for at least three-five years to allow their portfolio to gain from at least one bull run. If you are looking for multibaggers, stock must have high growth rates along with expanding PE ratios. The price we pay for the stock is important as it will determine whether there is enough scope left for a PE expansion to take place. 

Benefits of Investing in Small Caps

1. Huge growth potential: The first and the most important advantage that a small cap stock gives you is their high growth potential. Since these are small companies they have great scope to rise as opposed to already large companies.

2. Low Valuations: Usually small cap stocks are available at lower valuations compared to mid & large caps. Hence, if you invest in good small cap companies at initial stage and wait for couple of years,  you will see price appreciation not only because of growth in top line and bottom line but also due to rerating which happens with increase in market capital of the company.

3. Early Entrance Advantage: Most of the fund house and institutions do not own small caps with low market cap due to less liquidity which make it difficult for them to own sufficient no. of shares. This gives retail investors an opportunity to be an early entrant to accumulate such companies shares. When company grows in market cap by delivering consistent growth and becomes more liquid, entry of fund houses and institutions push the share prices up giving maximum gains to early entrants.  

4. Under–Researched: Small cap stocks are often given the least attention by the analysts who are more interested in the large companies. Hence, they are often under - recognized and could be under-priced thus giving the investor the opportunity to benefit from these low prices.

5. Emerging Sectors: In a developing economy where there are several new business models and sectors emerging, the opportunity to pick new leaders can be hugely beneficial. Also the disruptive models in the new age is leading to more churn and faster growth amongst the nimble footed smaller companies.

Concerns while Investing in Small Caps

1. Risk: The first and the most important disadvantage a small cap stock is the high level of risk it exposes an investor to. If a small cap company has the potential to rise quickly, it even has the potential to fall. Owing to its small size, it may not be able to sustain itself thereby leading the investor into great loses. After all, the bigger the company, the harder it is for it to fall.

2. Volatility: Small cap stocks are also more volatile as compared to large cap stocks. This is mainly because they have limited reserves against hard times. Also, it in the event of an economic crisis or any change in the company administration could lead to investors dis-investing thereby leading to a fall in prices.

3. Liquidity: Since investing in small cap stocks is mainly a decision depending upon one’s ability to undertake risk, a small cap stock can often become illiquid. Hence, one should not depend upon them for an important life goal.

4. Lack of information: As opposed to a large cap company, the analysts do not spend enough time studying the small cap companies. Hence, there isn’t enough information available to the investor so that he can study the company and decide about it future prospects.


Hidden Gems Value Picks
If these factors scare you but you still want to gain from the upside potential of such stocks, Saral Gyan Hidden Gems & Value Picks is an ideal choice for you. At Saral Gyan, team of equity analysts keep on evaluating small and mid cap stocks to explore the best Hidden Gems and Value Picks of stock market. Saral Gyan - Hidden Gems and Value Picks are the small and mid cap stocks with high probability to become multi-bagger stocks in future and a path for our investors to create wealth through equity investments in a long run. Multibaggers evolve over time. Many successful investors follow plenty of processes to identify these stocks early and continue to ride them till they evolve as multibaggers.

Grow your Wealth by Investing in Potential Multibagger Small Caps

Multibagger Hidden Gems Stocks
Its a fact that 74 Hidden Gems stocks out of 102 released during last 11 years have given more than 100% returns to our members. Moreover, 27 stocks out of these 74 are giving returns in the range of 400% to 7000%. 
Stocks like Cera SanitarywareCamlin Fine Sciences, Acrysil, Balaji AminesKovai MedicalWim PlastMayur Uniquoter, Dynemic ProductsRoto Pumps etc are some of our multibagger stocks which have given whopping returns in the range of 400% to 7000%.

We do update our members in terms of profit booking / exits depending upon various factors like overall Industry / Sector outlook, fundamentals of the company, management action plan and annual performance in terms of top line, bottom line, operating margins and other important parameters.

Below are some of the Hidden Gems stocks released by us which became multibaggers during last 11 years. As we made most of these reports public, you can access read / download our research reports by clicking on the Read / Download link:

 SERVICE NAME  COMPANY NAME RELEASE DATE  MULTI-BAGGER  OLD REPORT 
 HIDDEN GEMS
05 Sep 2010
10-BAGGER
 HIDDEN GEMS
07 Nov 2010 
  5-BAGGER
 HIDDEN GEMS
27 Mar 2011
27-BAGGER
 HIDDEN GEMS
30 Aug 2011
7-BAGGER 
 HIDDEN GEMS
27 Oct 2011 
15-BAGGER
 HIDDEN GEMS
24 Dec 2011 
35-BAGGER
 HIDDEN GEMS
31 Mar 2012 
8-BAGGER
 HIDDEN GEMS
05 Aug 2012 
18-BAGGER
 HIDDEN GEMS
30 Oct 2012 
5-BAGGER 
 HIDDEN GEMS
30 Oct 2012 
36-BAGGER
 HIDDEN GEMS
25 Dec 2012 
5-BAGGER
 HIDDEN GEMS
31 Jan 2013 
8-BAGGER
 HIDDEN GEMS
01 Jan 2014 
71-BAGGER
 HIDDEN GEMS
31 May 2014 
4-BAGGER
 HIDDEN GEMS
29 Jun 2014 
7-BAGGER
 HIDDEN GEMS
29 Jul 2014 
14-BAGGER
 HIDDEN GEMS
28 Dec 2014 
6-BAGGER
 HIDDEN GEMS
22 Mar 2015 
6-BAGGER
 HIDDEN GEMS
05 Jul 2015 
5-BAGGER
 HIDDEN GEMS
11 Oct 2015 
5-BAGGER
 HIDDEN GEMS
10 Apr 2016
5-BAGGER
 HIDDEN GEMS
08 May 2016 
10-BAGGER 
 HIDDEN GEMS
29 Jan 2017 
3-BAGGER
 HIDDEN GEMS
30 Aug 2017 
3-BAGGER
 HIDDEN GEMS
03 Jun 2018 
4-BAGGER
 HIDDEN GEMS
12 Dec 2018 
7-BAGGER

We are confident that we will continue to hunt best Hidden Gems from universe of small caps by doing authentic, in-depth and unbiased research work and support our members to make educated investment decision.

Be a disciplined investor who keep on investing in systematic way irrespective of market conditions and not an emotional investor who usually buy stocks during bull phase when stock prices are moving higher because of greed and sell them in panic during bear phase due to severe fall in stock prices, making mistake of buying high and selling low.

Start building your equity portfolio by making educated investment decisions, subscribe to our Hidden GemsValue PicksWealth-Builder services under Dussehra - Diwali Offer 2021! Attractive discounts & valuable freebies which make this festive season special for our readers are as under:

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2. Rs. 1 Lakh Diwali Muhurat Portfolio of 10 Stocks (Released on 04th Nov'21)
3. Existing Portfolio Health Check Up under Wealth-Builder Subscription
4. Saral Gyan eBook - "How to Grow your Savings?" worth Rs. 599 for Free.
5. Last 2 Months Reports of Hidden Gems, Value Picks & Wealth-Builder

Below table indicates subscription services and discounted prices valid up to 10th Nov'21.

Saral Gyan Dussehra - Diwali Offer 2021
SARAL GYAN
SUBSCRIPTION SERVICE
DUSSEHRA - DIWALI OFFER
DISCOUNTED PRICE
PAY ONLINE 
UPI / NET BANKING 
Hidden GemsRs. 10,000 9,000
Value PicksRs. 6,000 5,400
15% @ 90 DaysRs. 4,000 (No Discount)
Wealth-BuilderRs. 20,000 18,000
Combo 1: HG + VP + WB + 15%Rs. 40,000 28,000
Combo 2: HG + VP + 15%Rs. 20,000 15,000
Combo 3: HG + VPRs. 16,000 13,000
Combo 4: HG + 15%Rs. 14,000 11,500
Combo 5: VP + 15%Rs. 10,000 8,500

Simply choose the subscription service / combo subscription you would like to opt and click on SUBSCRIBE! link in above table to make online payment using your UPI or net banking facility.

In case you are not comfortable subscribing online, you can make the payment through cheque deposit / NEFT transfer in any of our banks and write back to us sharing transaction details. Click here to know about bank details.

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Do contact us in case of any queries, we will be delighted to assist you.

Wish you happy & safe Investing.

Regards,
Team - Saral Gyan.

Saturday, November 6, 2021

Pix Transmissions - Our 2-Bagger Stock in 5 Months

 Dear Reader,

We are pleased to share that we released our Hidden Gem Report on Pix Transmissions on 23rd May 2021 having market capital of 600 crores with multibagger potential. We recommended the stock at price of Rs. 441 for target of Rs 800, we are glad to inform you that the company has already achieved its target price and made all time high of Rs. 930 in July, it closed at Rs. 770 last week. Pix Transmissions has delivered maximum returns of 111% and is already a 2-Bagger stock for our Hidden Gems members in period of just 5 months.

Net profit of Pix Transmission rose 158.49% to Rs 21.92 crore in the quarter ended March 2021 as against Rs 8.48 crore during the previous quarter ended March 2020. Sales rose 52.43% to Rs 129.95 crore in the quarter ended March 2021 as against Rs 85.25 crore during the previous quarter ended March 2020.

For FY2020-21, net profit rose 114.62% to Rs 64.90 crore in the year ended March 2021 as against Rs 30.24 crore during the previous year ended March 2020. Sales rose 25.41% to Rs 399.56 crore in the year ended March 2021 as against Rs 318.61 crore during the previous year ended March 2020. 

Below is the summary of Pix Transmission Ltd Report released by our team as Hidden Gem Stock on 23rd May 2021.

1. Company Background

Pix Transmissions Multibagger Hidden GemIncorporated in July, 1981, Pix Transmission Limited is a public limited company promoted by Mr. Amarpal S Sethi (Chairman and Managing Director) and is engaged in the manufacturing of mechanical power transmission solutions like rubber V-belts, cut edge belts, ribbed belts, synchronous belts, timing belts etc.

Pix Transmission is among the most reliable manufacturers in the global Mechanical Power Transmission industry with an extensive range of high-performance V-Belts, Timing and Poly-V belts to suit a wide array of Industrial, Agricultural, Lawn & Garden and Automotive applications. The company has state-of-the-art development, manufacturing & testing facilities to ensure highly reliable solutions for almost all applications involving Rubber Transmissions Belts, in compliance with all international standards and a host of Global Quality Certifications.

The global credentials of the company are evident by its operations in India, Europe and the Middle-East, in addition to over 250 committed Channel Partners in over 100 countries worldwide.
Pix Transmissions Stock Analysis
Considering its global customer base, Pix Transmission has backed its products by building an impressive support infrastructure in several key markets across the globe including the UK, Germany, and UAE. Each of these locations houses a Distribution Centre and is equipped to provide technical, commercial, and logistical support. PIX is perhaps among a few global companies in its Industry to feature a high level of infrastructure outside the home country.

Pix Transmission is promoted by Mr. Amarpal S Sethi (Chairman and Managing Director). He has five decades of experience in the mechanical power transmissions space. There are two manufacturing units of the company located at Hingna and Nagalwadi & an automated rubber mixing facility at Nagalwadi in Nagpur, Maharashtra. Under his able guidance, Pix Transmission has become as one of the major players in the V-belt industry. The day-to day operations of the company are managed by a team of qualified and experienced professionals headed by Mr. Sonepal S. Sethi (Joint Managing Director) having vast experience in the V-belt industry.

Pix Product Range:  

Pix Transmissions Multibagger Product Range

Application Industries:

Pix Transmissions Stock Report Analysis

2. Recent Developments (23 May 2021)

i) Pix Transmission kicks off major expansion for capacity enhancement – Apr 2021

The company is expanding its value added product range and plans to significantly enhance manufacturing capacity for the same with a view to meet market demand for the foreseeable future.

Pix Transmission has commenced the first phase of its belt capacity expansion at its Nagpur facility. The capacity expansion would not only help meet the growing global demand for Pix Belts, but also results in improved efficiency while leveraging advanced manufacturing technology to achieve the company’s long term development goals.

ii) Pix Transmission adds PIX-PowerWare Pulleys to its Product Portfolio – Apr 2021

To provide a complete power transmission solution to its customers, Pix Transmission has added PIX PowerWare Pulleys to its product portfolio.
Pix Transmissions Research Report

It will help users in getting a complete power transmission solution comprising of Pulleys and Belts from the same manufacturer, thus compatibility of all components is ensured. PIX PowerWare Pulleys are made as per international standards and follow a strict manufacturing procedure in accordance with the ISO standards.

iii) Pix Transmission steps up presence in automotive segment with ‘PIX Force’ range of belts – Jan 2021

Pix Transmissions has launched belts meant especially for the automotive industry. Pix Force automotive belts have been designed to withstand the most extreme conditions encountered in automobile applications and are available for a full range of vehicle applications including two-wheelers, cars, vans, trucks, buses, heavy and light-duty vehicles, suitable for almost all engine options across different segments.

3. Financial Performance (23 May 2021)

Pix Transmission net profits rises 137.34% in the Dec 2020 quarter

Net profit of Pix Transmission rose 137.34% to Rs 18.37 crore in the quarter ended Dec 2020 as against Rs 7.74 crore during the previous quarter ended Dec 2019. Sales rose 26.77% to Rs 108.07 crore in the quarter ended Dec 2020 as against Rs 83.58 crore during the previous quarter ended Dec 2019.

Pix Transmission net profits rises 143.57% in the Sept 2020 quarter

Net profit of Pix Transmission rose 143.57% to Rs 19.51 crore in the quarter ended Sept 2020 as against Rs 8.01 crore during the previous quarter ended Sept 2019. Sales rose 34.73% to Rs 101.59 crore in the quarter ended Sept 2020 as against Rs 75.40 crore during the previous quarter ended Sept 2019.
 
Pix Transmission Quarterly Performance

4. Peer Group Comparison (23 May 2021)
Hidden Gem Pix Transmissions Peer Comparison

Note: There is no other listed player which offers similar products (rubber belts) like Pix Transmission. Hence, we did a comparison with companies dealing in natural / synthetic rubber products. This may have low relevance considering difference in nature of business.
 
5. Key Concerns & Risks (23 May 2021)

i) Rubber and Rayon are the key raw materials for manufacturing of rubber V-belts constituting a significant chunk of the total raw material purchases of the company. The prices of these commodities remain volatile depending upon demand supply situation. Pix Transmission is thus exposed to a certain extent to such fluctuation in prices.

ii) Pix Transmission operations are working capital intensive as the company derives around 50% of its revenues from the export market which entails a higher transit period and higher credit terms extended to distributors. 

6. Saral Gyan Recommendation (23 May 2021)

i) Global market size of rubber belts is around USD 4 billion with around 50% replacement market. Estimated Indian market size is around 1,500 crores of which 700 crore is replacement market. As per management, organised players have around 80% market share and 20% is unorganised. The Industrial and Agricultural market is shared by companies like Pix Transmission, Fenner and Continental which are major players in non- auto business.

ii) Pix Transmission has been consistently modernizing its plants. The company plants are largely automated, and are also backward integrated with a fully automated rubber mixing plant to ensure product consistency. The company exports its products to over 100 countries which generates nearly 50 percent of its revenue. Anticipating robust demand going forward with revival in capex cycle, management has announced capex to expand manufacturing capacity by 150% and expect to complete the capex by end of FY22.

iii) Pix Transmission specializes in Industrial & Agricultural belts. The company has the capability to manufacture belts from 10” to 10,000” offering more than 32,000 SKUs. Pix produce belts for NTPC which are 60 meters long, Pix Transmission is the only company in India to produce those belts with one power unit running on 30 of those belts. Pix Transmission has focused its effort in producing longer & heavier belts where competition from unorganized players is limited and business is more margin accretive. Also, developing more than 32,000 SKU’s involves high tooling cost. Development of tools is expensive and also consumes lot of time. Being it difficult and time consuming to develop similar product range like that of Pix Transmission, the company may face limited competition going forward.

iv) Rubber products is considered as a commodity business. However, Pix Transmission manufactures the belts which requires high degree of engineering. The company developed elastic belts for washing machines. The problem with the normal belt was related to load factor, if a washing machine is designed for 10 kg load and if one single cloth is washed, the machine will use the power for whole capacity which is not efficient. Pix Transmission solved this problem in FY18 by developing elastic belt for washing machines manufacturers. Crucial part was assimilating the technology which took two and half years to develop. Post development of elastic belt, Pix started commercial supplies to whirlpool and also added other clients later.

v) Pix Transmission has developed all its product in-house and offer world class quality products which are well accepted in developed US & European markets. There is significant scope of growth for the company in domestic market considering increase in farm mechanization and broadening of industrial capex cycle in the country going forward.

vi) As on March21, promoters shareholding in the company is 61.73% without any share being pledged. Promoters have increased their shareholding in the company from 61.12% to 61.73% over last 2 years. Foreign institutions do not hold any shares in the company and DIIs holding is negligible at 0.02%. Pix Transmission have registered sales CAGR of 8%, profit CAGR of 51% with ROE of 11% over last 5 years and looks attractive at current valuations considering increase in demand of its product with start of wider capex cycle in the country.
Pix Transmission Multibagger Financials
vii) Management is rewarding shareholders by paying consistent dividend since 2011. Company has been maintaining dividend payout between 10% to 20%. Considering company’s ongoing expansion plans, we believe 10% dividend payout is adequate. Dividend yield at current market price is 0.45%.
Pix Transmission Dividend History
viii) As per our estimates, Pix Transmission can deliver net profit of Rs. 82 crores in FY 2022-23 with annualized EPS of Rs. 60.15. At current price of 441.30, stock is available at forward P/E multiple of 7.3X based on FY22-23 earnings.

ix) On equity of Rs. 1.36 crore, the estimated annualized EPS for FY 22-23 works out to Rs. 60.15 and the Book Value per share is Rs. 192. At current market price of Rs. 441.30, stock price to book value is 2.3.

Considering expected revival in industrial capex cycle and increase in farm mechanization in the country, company’s planned capacity addition, diverse product offering with more than 32,000 SKUs, and its attractive valuation, Saral Gyan team recommends “Buy” on Pix Transmission Ltd at current price of Rs. 441.30 for target of Rs. 800 over a period of 12 to 24 months.

Buying Strategy:
  • 50% at current market price of Rs. 441.30
  • 50% at price range of Rs. 240 - 300 (in case of correction in stock price)
Portfolio Allocation: 3% of your equity portfolio

To Download Saral Gyan Hidden Gem Report of Pix Transmission - Click Here

Through Hidden Gems and Value Picks, we are providing you opportunities to invest in such small / mid cap stocks today. Infosys, Pantaloon, Dabur, Glenmark were the small cap stocks in past and today are the well known companies falling under mid and large cap space.

The stocks we reveal through Hidden Gems & Value Picks are companies that are either under-researched or not covered by other brokers and research firms. We keep on updating our subscribers on our past recommendations suggesting them whether to hold / buy or sell stocks on the basis of company's performance and future growth outlook.

Time has shown that smart investors have made their fortune by investing in equities in long term. None other asset class can match giving you such extra ordinary returns. Yes, its important for you to invest in right set of companies at right price with medium to long term perspective. If you think to invest in stocks for period of 6 months or 12 months, we suggest you to stay out of stock market because you are not investing, you are betting on volatility of stock market which could be risky.

Start building your equity portfolio by making educated investment decisions, subscribe to our Hidden GemsValue PicksWealth-Builder services under Dussehra - Diwali Offer 2021! Attractive discounts & valuable freebies which make this festive season special for our readers are as under:

1. Discount up to 30% on combo pack subscription (valid up to 10th Nov'21 only)
2. Rs. 1 Lakh Diwali Muhurat Portfolio of 10 Stocks (Released on 04th Nov'21)
3. Existing Portfolio Health Check Up under Wealth-Builder Subscription
4. Saral Gyan eBook - "How to Grow your Savings?" worth Rs. 599 for Free.
5. Last 2 Months Reports of Hidden Gems, Value Picks & Wealth-Builder

Below table indicates subscription services and discounted prices valid up to 10th Nov'21.

Saral Gyan Dussehra - Diwali Offer 2021
SARAL GYAN
SUBSCRIPTION SERVICE
DUSSEHRA - DIWALI OFFER
DISCOUNTED PRICE
PAY ONLINE 
UPI / NET BANKING 
Hidden GemsRs. 10,000 9,000
Value PicksRs. 6,000 5,400
15% @ 90 DaysRs. 4,000 (No Discount)
Wealth-BuilderRs. 20,000 18,000
Combo 1: HG + VP + WB + 15%Rs. 40,000 28,000
Combo 2: HG + VP + 15%Rs. 20,000 15,000
Combo 3: HG + VPRs. 16,000 13,000
Combo 4: HG + 15%Rs. 14,000 11,500
Combo 5: VP + 15%Rs. 10,000 8,500

Simply choose the subscription service / combo subscription you would like to opt and click on SUBSCRIBE! link in above table to make online payment using your UPI or net banking facility.

In case you are not comfortable subscribing online, you can make the payment through cheque deposit / NEFT transfer in any of our banks and write back to us sharing transaction details. Click here to know about bank details.

Hurry! Last 5 Days... Offer will disappear on 10 Nov'21 at 11.59 pm. Click here for details.

Do contact us in case of any queries, we will be delighted to assist you.

Wish you happy & safe Investing.

Regards,
Team - Saral Gyan.