Hidden Gem – Portfolio Stock (2x growth)

Indian growth story will make some multi baggers along its journey in coming years , key components in this sector are abrasives , metal , adhesives , glass , wood , ceramic etc. . This company which ticks all of the above categories along with superb sales growth , great corporate structure , shareholding pattern and peer group leadership.

Stock Name : Grindwell Norton , Current Price : 1240 , we are looking at a 2x growth in next 36 months.

The stock has a score of 9 out of 11 in our Quest algorithm , the stock has seen massive interest in recent years and posses a strong share holding pattern from FII and DII and has a super reputed brand as its parent company i.e SAINT GOBAIN. Our analysis is forward looking and we believe the profits will catch up with its current high p/e and the stock will keep on improving after brief consolidations . The company is a leader in niche sector and has very few organized players in the market indicating a high barrier to enter this sector.

Some positive pointers for the stock

  • Profit growth of 18% CAGR over last 5 years.
  • Dividend payout of 43%.
  • ROCE 25.0 % / ROE 18.7 % / Debt to Equity – 0.01.
  • Increase cash from operations and low cash from financing / fund raising .
  • Increaseing market share in all product categories.
  • Increase in stock value with increase in OBV ( on balance volume ) indicating strategic institutional buying.
  • 31 % growth in Net income year over year.
  • Entry into adhesive business will be exponential due to existing distribution network.
  • There is one concern is the recent slowness in sales growth , though this company is leader among the sales growth in its peer group we believe the sales will pick up once the lockdown scenario is normalized.

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