11 Jan , 2022 By : Kanchan Joshi
While one can invest in stocks for the short term or long term, the chances of earning high returns increase dramatically if you invest for the long term.
Your investment portfolio should also have companies that grow consistently and offer stability against adverse market conditions.
So which stocks should you invest in?
Enter bluechip companies.
Bluechip companies are well established and financially sound companies with stable growth. Though bluechip stocks can often be expensive, they are low-risk investments. These companies have zero or low debt and are resilient to economic downturns.
Such stocks can be a part of any investor’s portfolio, whether beginner or experienced.
Here are the top 5 bluechip growth stocks in the market right now. We have shortlisted them using the Equitymaster Stock Screener.
Bandhan Bank is the first bluechip growth stock on our list.
The bank is India's youngest universal bank that aims to reach out to the unbanked and under-banked segments of the population.
It benefits from the huge untapped microcredit space in India as it already has an established track record in the microfinance industry.
It also has a wide presence across India in metro, urban, semi-urban and rural areas, with over 5,300 outlets serving 23 m customers.
The bank recently completed its merger with GRUH Finance, the erstwhile housing finance subsidiary of HDFC, to expand its scope to housing finance activities.
In the last three years, the bank’s net interest income and net profit has grown at a CAGR of 18.9% and 4.2%, respectively.
This was mainly driven by growth in micro advances to emerging entrepreneurs and decreased cost of funds. The company has also maintained a net profit margin of around 24%.
Going forward, Bandhan Bank is concentrating on improving its asset quality mix by growing the share of individual loans and bringing down the share of group microfinance loans.
For the September 2021 quarter, the bank reported a marginal increase in revenue at Rs36.7 bn. However, the company reported a net loss of Rs30 bn for the quarter on account of higher provisions.
Next on our list is Bajaj Finance, one of the largest and diversified deposit-taking non-banking financial services companies (NBFC-D) in India.
The company is a subsidiary of Bajaj Finserv and is primarily engaged in lending. The company also accepts public and corporate deposits and offers a variety of financial services products.
It has two wholly-owned subsidiaries, namely Bajaj Housing Finance and Bajaj Financial Services, through which it has branched out into the housing loans and stockbroking business.
Bajaj Finance's net interest income and net profit has grown at a CAGR of 13.4% and 3.4% in the last three years. An increase in loans and advances has driven its profitability.
The company’s three-year average net profit margin stands at 19.4%, and three-year average dividend payout is at 11.2%.
Going forward, through the launch of digital platforms, the company is building a digital ecosystem of five apps. This will enable a seamless shopping experience for the customers and also improve the operational efficiency of the business.
In its recent quarterly results, Bajaj Finance’s operating income grew 18.6% YoY driven by strong rural growth. Net profit also grew 53.5% YoY.
PI Industries is the third company on our stocks list.
The company is a leading player in the agrochemicals space and has a diversified portfolio of products. It also has a strong presence in the domestic and international markets.
The company has five formulation facilities and 14 multipurpose manufacturing plants across four locations. PI Industries also has over 100 patents in its name.
PI Industries revenue has grown at a healthy pace at about 17.4 percent CAGR for the past three years while net profit has grown at a CAGR of 21.4%.
Going forward, strong growth in exports and a healthy order book will drive the company’s revenue and profit in the medium term.
In July 2021, PI Industries acquired a stake in Ind-Swift Laboratories to purchase its active pharmaceutical ingredients (API) business. With this acquisition, the company has diversified into the pharmaceutical space.
In the latest quarterly results, PI Industries reported a 17% YoY increase in revenue at Rs13.8 bn. Net profit grew by 5.7% YoY.
Divis Laboratories, a pharmaceutical company, is fourth on our list.
The company primarily manufactures active pharmaceutical ingredients (API), intermediates and nutraceutical ingredients.
It has a presence in over 95 countries with a diversified product portfolio of 130 products spread across various therapeutic areas.
Divis Laboratories is ranked one among the top three API manufacturers globally and is one of the top API companies in India.
In the last three years, the company's revenue and net profit has grown at a CAGR of 11.3% and 13.6%, respectively. Growth in volumes and cost efficiency initiatives taken by the company have led to higher profits.
In 2022, Divi Laboratories is planning a capex of Rs6-10 bn in Kakinada to expand the capacity of its generics business. This will be operational in the financial year 2023. It also stands to benefit from the growth of the global pharma industry in the medium term.
In the recent quarterly results, the company's revenue and profit grew by 13.6% and 16.7% YoY, respectively. The growth in revenue and profit resulted from the capex initiatives the company took in the last two years.
The last company on our list is a pioneer in housing finance in India - Housing Development Finance Corporation Limited (HDFC).
The company is one of India's major housing finance companies and has an established presence in the mortgage finance market.
It also has a presence in banking, insurance, and asset management through its subsidiaries HDFC Bank, HDFC Life Insurance, and HDFC Asset Management.
HDFC has an established track record of operations, healthy asset quality, well-defined risk management procedures and strict underwriting standards.
In the last three years, the company’s net interest income and net profit has grown at a CAGR of 18.3% and 4.9%, respectively. Revenue growth was driven by higher demand for housing loans.
Going forward, a strong demand for housing loans is expected to drive the company’s net margins in the medium term.
For the September 2021 quarter, HDFC reported a 13.2% YoY increase in revenue. Net profit rose marginally by 3%.
Why are bluechip stocks a good investment?
Bluechip stocks have a long-standing track record of growth and profitability.
They are diversified businesses that sell high-quality products and services. These companies also have the ability to bounce back strong from any adverse conditions.
However, since they are mature companies, their growth rate may not be as high as smallcap and midcap companies.
Nevertheless, bluechip stocks are low-risk investments, and any investor, beginner or experienced, can consider including them in their portfolio for a long-term horizon.
By doing so, you need not worry about timing the market. You just need to be patient enough for the stocks to create wealth for you.
Before you consider investing in any stock, it is important to check the fundamentals and valuations of the business.