Welcome to the second part of the article on top monopoly stocks in India. In the previous article, we discussed "Competitive advantage" which means the factors that allow a company to produce goods or services better or more cheaply than its competitors and allow the producing entity to produce more goods than its market peers allow generating sales or better margins and also discussed "Monopoly business" which means the seller does not face any opposition as he is the only supplier available in the market. Such organizations generally have a long existence and regular revenue. Then we discussed the top five monopoly stocks, including HUL, Asian Paints, Maruti Suzuki, EICHER Motor, and Pidilite. If you haven't read the previous article, I would recommend reading it first. Alright, let's continue and take the next 10 monopoly stocks.
Nestle
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The 10th stock on my list is Nestle India Limited, it is the parent company of some of the top brands which include chocolates like the iconic Nescafe Coffee, Kit-Kat, Bar One, Milkybar, and Munch; And the most popular Maggie, it is so popular that people don't say, give me a noodle rather they say give me Maggie. Another popular brand is Cerelac, people don't say give me baby food rather they say give me Cerelac. Nestle enjoys more than 95% market share in the infant nutrition category and more than 40% market share in the noodle category, both these categories will continue to grow due to growing awareness of branded and quality food, especially in towns and rural areas of the country. As the income levels are rising, people would increase their consumption of branded products and Nestle would enjoy good growth in the future.
Over the past five years, Nestle's profits have grown at a CAGR of 18.6% and its average ROCE is 79.4% which is again brilliant. Nestle is currently trading at a trailing 12 months PE of 77, whereas its five-year median PE is 68. So Nestle is looking fairly valued at current levels, and investors can certainly invest in Nestle from a long-term perspective.
Pfoudler
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The 9th stock on my list is GMM Pfoudler, it was established in 1962, as Gujarat Machinery Manufacturing GMM had a joint venture with American company Pfoudler in 1987, and it was renamed GMM Pfoudler. It is in the business of glass-lined equipment. GMM Pfoudler had diversified its product portfolio to include mixing systems, filtration and drying equipment, engineered systems, and tailor-made process equipment that finds extensive usage in the pharma and chemical industry. GMM Pfoudler has a market share of 50% in Indian glass-lined equipment. Dear friends Indian government has a lot of focus on manufacturing with the PLI Scheme, Make in India, and Atmanirbhar Bharat Initiative. Sectors like Pharma & Chemical will continue to grow and GMM Pfoudler has bright future growth prospects.
Over the past five years, GMM Pfoudler's profits have grown at a CAGR of 30.9% and its average ROCE is 26.7% which is great. It is currently trading at a trailing 12 months PE of 78. Whereas its median PE in 5 years is 38. So GMM Pfoudler is looking overvalued at current levels but I see immense potential in this stock. It is worth investing in the stock periodically for the long term.
PAGE Industries
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The 8th stock on my list is Page Industries Limited, incorporated in 1995, is the exclusive licensee of Jockey International for the manufacture, distribution, and marketing of the Jockey brand in India, Sri Lanka, Bangladesh, Nepal, and the United Arab Emirates. Page Industries is also the exclusive licensee of SPEEDO International Limited for the manufacture, marketing, and distribution of the SPEEDO brand in India. Page Industries earns a market cap of 50% in the Indian men's and women's innerwear segment. As the income levels are rising, there would be more demand for branded in the year as comfort is the most important aspect of innerwear and that would fuel the growth of Page Industries.
Over the past five years, Page Industries' profits have grown at a CAGR of 11.9% and its average ROCE is 61.6%, which is brilliant. It is currently trading at a trailing 12-month PE of 123 Whereas its means PE in five years of 66. Clearly, the valuation is very high. One of the reasons is the negative warning in June 20 quarter due to COVID. But still, the valuations are expensive. I would suggest keeping an eye on this stock and buying on dips.
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7th stock on my list is Jubilant Foodworks was established in 1995, Jubilant FoodWorks is the parent company of Domino's Pizza in India. Jubilant FoodWorks is the master franchisee of US-based Domino's and DUNKIN DONUTS in India, Nepal, Sri Lanka, and Bangladesh. It was a 70% market share in the organized pizza market in India. If you look at the future growth perspective, Indian society is evolving with a rise in the working population, nuclear and individual households, and more outdoor activities such as leisure trips and outings with friends, family, and Colleavaue. These factors have increased the frequency of eating out and this would fuel the growth of jubilant food work. It has also put it into the ready-to-eat sauces gravies and pasta segment with the brand chef boss.
Over the past five years, Jubilant Foodwork's profits have grown at a CAGR of 22% and its average ROCE is 29.7%, which is great. Jubilant FoodWorks is currently trading at a PE of 234, which is very expensive. I think this is one stock that is highly overvalued at current levels. investors can wait for the correction to make an entry in this stock, but certainly worth having for a long-term perspective after the correction.
Titan
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The 6th stock on my list is Titan Company Ltd, Founded in 1984 is an Indian luxury goods company that mainly manufactures fashion accessories such as watches, jewelry, and eyewear. Titan is just a 60% market share in the organized watch market in India. If we talk about the future, the biggest thing for India in the next 20 years is consumption. There is a rising salary and people are spending money on luxury items like watches, jewelry, and accessories like eyeglasses. Titan is the leader in the Indian luxury segment, which has immense growth potential as most of the categories are highly under-penetrated.
Over the past five years, Titan's profits have grown at a CAGR of 12.9% and the average ROCE is 25% which is good. It is currently trading at a trailing 12-month PE of 174. Whereas its median PE in five years is 65. Again, the major reason is due to three bad quarterly earnings due to COVID. Even if a discount that the valuation is on the higher side, but I think Titan is one company that every investor should have in the portfolio. I would suggest keeping an eye on this stock and buying on the correction.
CAMS
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The 5th stock on my list is Computer Age Management Service Limited, incorporated in 1988 as a mutual fund transfer agency to Indian asset management companies. So basically CAMS keep a track of investors' transactions in the mutual funds including buying a mutual fund redeeming a mutual fund switching in and out changing bank mandates updating personal information etc. CAMS has a market share of 70% of the total assets under management which is the AUM of the Indian mutual fund industries. It basically uses technology to provide services to AMCs. Friends, if you look at the mutual fund industry in India, it is still in the nascent stage. In the future, many investors would invest via mutual funds, and this sector would see tremendous growth CAMS being the leader in RTA would continue to grow. Over the past 5 years, CAMS's profits have grown at a CAGR of 17.9%, and its average ROCE is 49.4%, which is excellent. It is currently trading at a trailing 12-month PE of 57%. Since its IPO in October 2020, we don't have historical data to compare the valuation. But, Camps are a growing company with high profitability, and it would continue to come on premium valuation. I think CAMS is looking fairly valued at the current valuation and worth buying for long-term wealth creation.
Indian Energy Exchange
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4th stock on my list is Indian Energy Exchange, established in 2008 as an energy exchange licensed by a ventral electricity regulation commission for sports trading in power, electricity, and trading of renewable energy certificate and energy-saving certificate. The main activity of the company is to provide an automated platform and infrastructure for carrying out trading in electricity units for the physical delivery of electricity. If you look at the future growth, the per Capita electricity consumption is expected to grow on account of rapid urbanization, growth in the manufacturing sector, and various government initiatives including 24×7 power to all. In fact, the future is about electric vehicles, and that would again require charging infrastructure. Most of these charging stations may end up buying electricity from these power exchanges.
Over the past 5 years, its profits have grown at a CAGR of 16% and the average ROCE is 63.9%, which is exceptional. IEX had its IPO in October 2017, and it is currently trading at a trailing 12-month PE of 50. The median PE is 31. So currently IEX is trading at a higher valuation as compared to the median PE. But this is again one stock that can be considered on buying on dips for a long-term perspective.
APL Apollo
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3rd stock on my list is APL Apollo Tubes Limited, established in 1986, and is one of the largest producers of structural steel tubes in India. Its product offering includes over 1100 plus varieties of pre-galvanized tubes, structural steel tubes, galvanized tubes, MS black pipes, and hollow sections. Apollo Tubes has a market share of more than 50% of instructional and galvanized tubes in India. In the future, there would be more and more demand for steel for building the infrastructure of the country. This will continue to drive the growth of APL Apollo tubes.
Over the past five years, APL Apollo's profits have grown at a CAGR of 30.1% and the average ROCE is 21.4%, which is exceptional. Apollo is currently trading at a trailing 12-month PE of 52. Whereas its median PE of 5 years is 22. Clearly, it is overvalued, the better strategy would be to buy the stock periodically.
Indiamart Intermesh
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The 2nd stock on my list is Indiamart established in 1999, the largest B2B online market space connecting buyers with sellers. It enjoys more than 55% market share in India's online B2B classified space. It provides a platform for small and medium enterprises as well as individuals to showcase their products and services on digital platforms. Today, Indiamart has a portfolio of 12 crore+ buyers, 64 lakh+ suppliers, and 7.1 crore+ listed products and services.
Indiamart's profit growth in the last 5 years is 40% and its current ROCE is 84%. Indiamart is currently trading at a trailing 12-month PE of 96, which is clearly overvalued, I would suggest waiting for the correction to invest in this share.
IRCTC
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1st stock on my list is IRCTC, established in 1999 and is the only company authorized to sell Railway tickets for both online and offline channels. It is the only company authorized to sell water bottles in the entire railway network. It is the only company authorized for catering on the Indian railway. Friends, as more and more people are interested in travel, they would be in demand in every category, including online ticketing, water bottles, and catering services, including online catering, as well as the chain of cafes and restaurants within the railway network. IRCTC enjoys a true monopoly in the business with a 100% market share in Indian railway ticketing, Railway catering, and railway water supply.
Over the past 5 years, IRCTC profits have grown at a CAGR of 32.3% and its average ROCE is 52.2% which is simply brilliant. IRCTC is currently trading at a trailing 12-month PE of 154. The reason for such high PE is due to poor earnings in the last 3 quarters due to COVID. But IRCTC is one of those stocks which has the potential to give 10x returns in the next 10 years and this stock is a must-have in your portfolio.
This is my list of the next 10 monopoly stocks in which I have tried to summarise monopoly stocks include Nestle, GMM Pfoudler, Page Industries, Jubilant Foodworks, Titan, CAMS, Indian Energy Exchange, APL Apollo, Indiamart intermesh, and IRCTC.
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