Top 15 Monopoly stocks in India - Part II
In the previous article, we discussed what is a competitive advantage and what is monopoly. Then we discussed the top 5 monopoly stocks including HUL, Asian Paints, Maruti Suzuki, Eicher Motor, and Pidilite.
If you haven't read Part - I of this article then I would recommend you to do it first.
Alright, let’s continue and take the next 10 monopoly stocks.
Established in 1959, Nestle is the parent company of some of the top brands including the iconic Nescafe coffee, chocolates like Kitkat, Barone, Milkybar, and Munch, and the most popular Maggie. Maggie is so popular that people do not say give me a noodle, they say that give me maggie. Another popular brand is Cerelec. People do not say that give me baby food, they say that 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 would continue to grow on account of increasing awareness towards branded and quality food especially in the towns and rural part of the country. As the income levels are rising, people would increase the consumption of branded products and Nestle would enjoy good growth in the future.
Over the past 5 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 TTM PE of 77 whereas its median PE in 5 years is 68. So Nestle is looking fairly valued at current levels and investors can certainly invest in Nestle from a long-term perspective.
9. GMM Pfaudler
Established in 1962 as Gujarat Machinery Manufacturing, GMM had a joint venture with American company Pfaulder in 1987 and it was renamed GMM Pfaudler. It is in the business of glass-lined equipment. GMM Pfaudler has diversified its product portfolio to include Mixing Systems, Filtration & Drying Equipment, Engineered Systems, and Tailor Made Process Equipment that finds extensive usage in pharma and chemical industries.GMM Pfaulder has a market share of 50% in Indian glass-lined equipment.
Friends, the Indian government has a lot of focus on manufacturing with the PLI scheme, the Make in India, and the Aatmnirbhar Bharat initiative. Sectors like Pharma and Chemical would continue to grow and GMM Pfaudler has bright future growth prospects.
Over the past 5 years, GMM Pfaudler 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 TTM PE of 78 whereas its median PE in 5 years is 38. So GMM Pfaudler is looking overvalued at current levels. But I see immense potential in this stock. It is worth investing in this stock periodically for the long term.
8. Page industries
50% market share in mens and womens innerwear segment. Incorporated in 1995, Page Industries Limited is the exclusive licensee of JOCKEY International Inc. for manufacturing, distribution, and marketing of the JOCKEY® brand in India, Sri Lanka, Bangladesh, Nepal, and the UAE. Page Industries is also the exclusive licensee of Speedo International Ltd. for the manufacturing, marketing, and distribution of the Speedo brand in India.
Page industries commands a market cap of 50% in the Indian men and women's innerwear segment. As the income level is rising, there would be more demand for branded innerwear as comfort is the most important aspect in innerwear and that would fuel the growth for page industries.
Over the past 5 years, Page industry 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 TTM PE of 123 whereas its median PE in 5 years is 66. Clearly, the valuation is very high. One of the reasons is negative earnings in June 20 quarter due to COVID. One still the valuations are expensive. I would suggest keeping an eye on this stock and buy on the dip.
7. Jubilant Foodworks
Established in 1995, Jubilant FoodWorks is the parent company of Dominos pizza in India. Jubilant FoodWorks hold the master franchisee of US-based Dominos and Dunkin Donut in India, Nepal Srilanka, and Bangladesh. It holds a 70% market share in the organized pizza market in India. If we look at the future growth prospects, Indian society is evolving with a rise in the working population, nuclear/individual households, and more outdoor activities such as leisure trips and outings with friends, families, and colleagues. These factors are driving the frequency of eating out and this would fuel the growth of Jubilant FoodWorks. It has also forayed into ready to eat sauces, gravies, and pasta segment with the brand Chefboss.
Over the past 5 years, Jubilant FoodWorks profits have grown at a CAGR of 22% and its average ROCE is 29.7% which is good.
Jubilant Foodworks is currently trading at PE of 234 which is very expensive. I think this is one stock that is highly overvalued at current levels. Investors can wait for corrections to make an entry in this stock. But certainly worth having for a long-term perspective after correction.
Founded in 1984, Titan is an Indian luxury goods company that mainly manufactures fashion accessories such as watches, jewelry, and eyewear. Some of the popular brands of Titan include Titan watches, Fastrack, sonata in watches. Tanishq in jewelry and Titan Eyeplus in the eyewear category and Skinn in the perfume category.
Titan enjoys a 60% market share in the organized watch market in India.
If we talk about the future, the biggest theme for India in the next 20 years is Consumption! There is a rise in salaries 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 underpenetrated.
Over the past 5 years, Titan profits have grown at a CAGR of 12.9% and its average ROCE is 25% which is good.
It is currently trading at a TTM PE of 174 whereas its median PE in 5 years is 65. Again the major reason is due to 3 bad quarterly earnings due to COVID. Even if we discount that, the valuations are on the higher side. But I think Titan is one company that every investor should have in their portfolio. I would suggest keeping an eye on this stock and buy on the correction.
Incorporated in 1988, Computer Age Management Services Limited (CAMS) is a Mutual Fund Transfer Agency to the Indian Asset Management Companies. So basically, CAMS keep a track of investors’ transactions in mutual funds including buying a mutual fund, redeeming a mutual fund, switching in or out, changing bank mandates, updating personal information, etc.
CAMS has a market share of ~ 70% of the total assets under management (AuM) of the Indian mutual fund industry. 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 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 TTM PE of 57. Since it has its IPO on Oct 20, we don’t have historical data to compare the valuation but generally speaking, CAMS is a growing company with high profitability and it would continue to command premium valuations. I think CAMS is looking fairly valued at current valuation and worth buying for long-term wealth creation.
Established in 2008, the Indian Energy Exchange is an energy exchange, licensed by the Central Electricity Regulatory Commission (CERC) for spot trading in power/electricity and trading of Renewal Energy Certificate (REC) and Energy Saving Certificates (ESCerts). 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 we 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 from the government 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, IEX profits have grown at a CAGR of 16% and its average ROCE is 63.9% which is exceptional.
IEX had its IPO in Oct 2017 and it is currently trading at a TTM 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.
3. APL Apollo
Established in 1986, APL Apollo Tubes Limited is the largest producer of Structural Steel Tubes in India. Its product offerings include over 1,100 varieties of Pre- Galvanized Tubes, Structural Steel Tubes, Galvanized Tubes, MS Black Pipes, and Hollow Sections. Apollo tubes have a market share of >50% in structural 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 would continue to drive the growth for APL apollo tubes. Over the past 5 years, Apollo tubes profits have grown at a CAGR of 30.1% and its average ROCE is 21.4% which is exceptional.
IEX is currently trading at a TTM PE of 22 whereas its median PE of 5 years is 52. Clearly, it is overvalued. The better strategy would be to buy this stock periodically.
2. Indiamart Intermesh
Established in 1999, Indiamart intermesh is the largest B2B online marketplace 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 the digital platform. Today, Indiamart has a portfolio of 12 Crore+ buyers, 64 lakh+ suppliers, and 7.1 Crore+ listed products and services.
The company has a diversified presence in metros, tier 2, and other parts of the country.
It has a profit growth of 40% in the last 5 years and the current ROCE of 84%.
Indiamart is currently trading at a TTM PE of 96 which is clearly overvalued. I would suggest waiting for correction to invest in this share.
Established in 1999, IRCTC is the only company authorized to sell tickets for Indian railways 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, there would be demand in every category including online ticketing, water bottle and catering service including online catering as well as a chain of cafes and restaurants within the railway network.
IRCTC enjoys the true monopoly in the business with a 100% market share in railway ticketing, railways 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 TTM 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 stock that has the potential to give a 10x return in the next 10 years and a must-have stock in the portfolio. Those who have not invested in IRCTC can certainly invest at a current level and those who have already invested can consider buying periodically for long-term wealth creation.
So this is my list of next 10 monopoly stocks.
If I summarize, the next 10 monopoly stocks include Nestle, GMM Pfaudler, Page industries, Jubilant Foodworks, Titan, CAMS, IEX, APL Apollo, Indiamart Intermesh and finally IRCTC.
There are few other great stocks that also enjoy high market share including Reliance which has around 40% market share in Telecom, Britannia with 35% market share in biscuit segment, Hero Motocorp with 35% market share in the Indian 2 wheeler segment, Info edge with 60% market share in Indian job market space, P&G health and hygiene with 50% market share in female care category, MCX with 85% market share in commodity trading and HLE glass coat with 50% market share infiltration & drying equipment. There are many more but I haven't considered them as they do not qualify in my shortlisting criteria.
Please note that I have updated the Live tracker with these monopoly companies where you can get all the required information like market cap, current market price, PE ratio, sector, 52 weeks high, 52 weeks low, etc. You can access this live tracker for free on my website. It also includes other top stocks including top 100+ superstocks, top 50 stocks, top 18 large-cap, top 10 mid-cap, and top 10 small-cap.