Summary of 3 Hidden Multibagger Stocks With MASSIVE Capex Plans (80% Upside Potential!)

Summary of Video: "3 Hidden Multibagger Stocks With MASSIVE Capex Plans (80% Upside Potential!)"

The video highlights three companies with strong potential for significant stock price appreciation due to massive ongoing Capital Expenditure (capex) plans. The core thesis is that companies investing heavily in capex today are likely to unlock substantial revenue growth in the near future, although these investments come with execution risks.

Key Financial Strategies and Market Analyses

• Capital Expenditure (Capex) Importance:
  • Capex involves investing in new manufacturing plants, machinery, and infrastructure, which initially lowers margins due to upfront costs but leads to higher revenue and margins as capacity utilization increases over time (from 10-20% to 75-80%).
  • Investing during the capex phase (before revenue realization) can yield significant returns if the projects succeed.
• Risks:
  • Execution risk (delays, cost overruns).
  • Product risk (if the product or market demand underperforms).
  • Raw material price volatility and geopolitical risks.
• Operating Leverage:
  • Companies with low current margins but potential to expand margins as capacity utilization improves are attractive.
  • Example: Companies operating at 7-8% margins with potential to double margins through capex-driven volume growth.
• Technical Analysis:
  • All three companies show strong relative strength and are near key breakout zones on their stock charts, indicating potential for upward price movement.

Companies Analyzed

1. Deepak Fertilizers
   • Sector: Chemicals and Fertilizers (mining chemicals, crop nutrition, industrial chemicals).
   • Revenue split: Industrial chemicals (44%), mining TAN (34%), crop nutrition (21%).
   • Market position: Largest domestic solid TAN manufacturer, largest nitric acid manufacturer in Southeast Asia.
   • Capex: ₹4,500 crore ongoing capex program including new TAN and nitric acid plants, with ₹1,300 crore already spent. Major revenue impact expected by FY26 end.
   • Growth drivers: Own raw material production (ammonia plant), cheaper gas supply reducing fuel costs by 20%, focus on higher-margin products.
   • Risks: Construction delays, raw material price volatility, geopolitical issues.
   • Financials: Asset base doubling without corresponding revenue yet; strong asset-to-turnover ratio indicating growth potential.
   • Technicals: Near breakout to new highs, strong relative strength.
2. HCG Healthcare Global
   • Sector: Oncology Hospitals and healthcare services, including fertility business.
   • Network: 25 centers, 4 multispecialty hospitals, 1,500 operational beds with 300 new beds planned (20% capacity increase).
   • Capex: ₹280 crore annual guidance, ₹172 crore spent in 9 months.
   • Recent development: KKR acquired 54% stake, providing strategic backing and growth potential.
   • Growth drivers: Expansion of brownfield centers, digital revenue growth (114%), increasing bed capacity.
   • Technicals: Recently broke out to all-time highs, currently in an upward trend.
3. SRF Ltd.
   • Sector: Chemicals, packaging films, and Technical Textiles.
   • Revenue mix: Chemicals (48%), packaging (34%), Technical Textiles (18%).
   • Capex: ₹1,500-2,000 crore ongoing projects, with ₹2,000 crore invested in last 6-7 quarters. Fixed assets doubled over 5 years from ₹6,400 crore to ₹13,500 crore, while revenue and profit growth lagged.
   • Risks: US tariffs, export challenges, production delays, raw material price fluctuations, geopolitical tensions.
   • Financials: Revenue stagnant since 2022 but large asset base expansion indicates potential for future growth.
   • Technicals: Attempting long-term breakout after multi-year consolidation.

Methodology / Step-by-Step Guide for Identifying Capex Plays

• Identify companies with high relative strength in the market.
• Look for companies with significant recent or ongoing capex that has not yet translated into revenue.
• Analyze the business verticals and market position to understand growth drivers.
• Examine the capex details: size, projects involved, timelines, and expected commissioning.
• Assess operating leverage potential by comparing current margins and utilization with potential future capacity.
• Evaluate risks: execution, raw material prices, geopolitical factors.
• Conduct technical analysis to identify breakout points and relative strength trends.
• Review balance sheet metrics such as asset growth versus revenue growth, asset turnover ratios, and promoter/institutional holding changes.
• Use external strategic developments (e.g., acquisitions, new partnerships) as additional growth signals.

Notable Quotes

— 00:00 — « Whenever a company does a huge amount of capex, that means a massive amount of revenue is going to be unlocked very soon. »

— 01:11 — « What is the risk? Execution risk. What if they don't do the plan properly? What if the product becomes bad or margins go down? Those risks are there. »

— 07:57 — « Risks include construction delays, unstable ammonia prices, raw material fluctuations, market pressure, and global politics. »

— 10:16 — « HCG Healthcare Global is a very interesting player in oncology, a high margin, high spending business covering diagnostics to post care. »

— 15:40 — « If you feel you don't want to subscribe, no problem. At least click on the like button so I'll be very happy. »

Category

Business and Finance

Video