Top Performing PSU Multibagger stock that gave 320% returns
PSU stocks are not fancy stocks for many investors. There are few PSU stocks that gave stable returns to investors. If you are wondering which is the PSU multi-bagger stock that gave the highest returns among PSU companies in the last 5 years, it is ITI Limited. ITI Limited is a telecom and defense equipment maker in India. ITI gave whopping 320% returns in last 5 years. Means if would have invested Rs 1 Lakh 5 years back, your investment would have now been Rs 4.2 Lakhs. What is making such PSU stock to create so much value to the investors? Would ITI Limited continue to be a multi-bagger PSU stock in coming years?
About ITI Limited
ITI Limited is a public sector undertaking in the telecommunications technology segment, which was established as departmental factory in 1948.
ITI Limited has a diverse suite of products including manufactured products like Gigabit Passive Optical Network, Managed Leased Line Network products, Stand Alone Signaling Transfer Point, Wi-Fi Access Point, Radio Modem, SMPS, Set Top Box, Defence products like multi-capacity encryption units, Bulk encryption Units, Terminal End Secrecy Devices, Passive infrastructure products such as Optical Fiber Cable, HDPE duct, Antenna, diversified products such as smart energy meters, smart cards, solar panels, mini personal computers.
It has manufacturing units in Bengaluru, Naini, Rae Bareli, Mankapur and Palakkad along with an R&D centre in Bengaluru and 25 Marketing, Services & Projects (MSP) centers in India, which are located at Bengaluru, Bhubaneshwar, Chennai, Hyderabad, Kolkata, Lucknow, Mumbai, New Delhi and 17 other places spread across the country.
ITI Limited – Financial Performance during 2017-2020
Top line – Company consolidated revenues grew from 1,548 Crores in FY2017 to Rs 2,058 Crores in FY2020 (CAGR 10%).
EBITDA – Company consolidated EBITDA drop from Rs 419 Crore in FY17 to Rs 291 Crore in FY20 (11% CAGR drop).
Profit – Company consolidated net profit dropped from Rs 266 Crores in FY17 to Rs 150 Crores in FY20.
ITI Limited – Financial Performance Qtr ending Sep-2020
Company consolidated revenues increased from 419 Crores for Qtr ending Sep-2019 to Rs 433 Crores for Qtr ending Sep2020. Sequentially it grew by 162% compared to previous Qtr (due to low nos in Jun-20 Qtr nos it looks high).
Company consolidated net profits dropped from Rs 7 Crores for Qtr ending Sep-2019 to Rs 56 Crores loss for Qtr ending Sep-2020.
Why to invest in ITI share?
The company expects to grow at 25% this fiscal year and 30% next fiscal year (Source: MD interview)
Company has signed contracts worth Rs 27 bn that would drive the growth for next few years
Strong annualized EPS growth
Improved ROE in the last couple of years
Book value per share is improving in the last couple of years
A company that has zero promoters pledge
Strong momentum in the share prices in the last 1 month to 5 year period
Low Lights of investing in ITI Limited
Company has weak financials
Its operating profit and profit margins are in declining mode
The company has high debt.
This stock has not attracted FIIs and mutual funds yet.
How much share price increased in the last 1 to 5 years?
The share price has moved from Rs 30.5 to Rs 128 in the last 5 years giving 320% returns. If one would have invested Rs 1 Lakh in Dec-2016, the amount would have grown to Rs 4.2 Lakhs.
The share price has moved from Rs 92 to Rs 128 in the last 1 year giving 39% returns. If one would have invested Rs 1 Lakhs in Dec-2019, the amount would have grown to Rs 1.4 Lakhs.
The share price has moved from Rs 123 to Rs 128 in the last 1 month giving 4% returns.
Technical charts of this stock show BULLISH.
Here is the price chart in the last 5 years (source Moneycontrol)
Which mutual funds have invested in an ITI Limited Stock?
There are a few mutual funds that invested in ITI as of end of Nov-2020.
1) Nippon India ETF NIFTY Midcap 150
2) Motilal Oswal Nifty Midcap 150
3) ICICI Pru Midcap 150 ETF
Should you invest in ITI limited shares?
ITI Limited is a PSU multi bagger stock that gave 320%+ returns in the last 5 years. Its revenues grew at 10% CAGR in the last 5 years. Its margins are fluctuating and incurred losses in recent quarters. It has bagged several large orders in the recent past and currently has over 27 bn orders which would drive its growth in the next couple of years. While in the short term, we may or may not see much momentum, in medium to long term, this could turn to be multi bagger PSU stock. One can buy such multi bagger stocks at dips / market corrections.
Disclaimer: I am not holding any shares in this company as of the date of writing this article. But I may purchase them anytime.
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