Small-cap and mid-cap stocks have witnessed an explosive surge of more than 25%, indicating a broad-based market rally and a potential change in investor sentiment.
What’s even more intriguing is how individual stocks have defied expectations. Cochin Shipyard, the belle of the ball, was the Sensex’s best-performing stock during the first half of 2024. However, there were several less predictable winners as the benchmark indices rose to record-high levels. Let’s explore the true winners of the first half of 2024.
1. Cochin Shipyard
Cochin Shipyard, a government-owned company and India’s largest public-sector shipyard by capacity, has emerged as a standout performer. Although registered as a commercial shipyard, it derives most of its revenues from building and repairing defence ships.
This unique position in India’s defence manufacturing space has propelled its shares up by 294% in 2024 so far.
The surge follows Cochin Shipyard receiving an order from a European client to design and build a Hybrid Service Operation Vessel (SOV), with an option for two more such vessels. This ₹5-10 billion project is expected to be completed by the end of 2026. As of 18 June 2024, the company boasts an order book valued at ₹215 billion. To expand its capabilities, the company is building a new dry dock, a 600-tonne gantry crane, and expanding its international ship repair facility in Cochin. Additionally, Cochin Shipyard is setting up a modernized shipbuilding facility in West Bengal.
2. Aegis Logistics
Next on the list is Aegis Logistics. The company imports, stores, and distributes liquified petroleum gas (LPG), chemical products, and vegetable oils. It also manufactures marine products and provides bunker fuels to ships. Aegis Logistics operates a large fleet, including LPG terminals, bulk liquid handling terminals, filling plants, pipelines, and LPG gas stations, to deliver its products and services.
So far in 2024, shares of Aegis Logistics have rallied around 155%, rising from ₹349 in January to ₹889 as of 4 July 2024.
This impressive performance can be attributed to the company reporting better-than-expected earnings before interest, tax, depreciation, and amortization (Ebitda) of ₹3.1 billion, up 51% year-on-year (YoY), mainly driven by strong Ebit growth of 105% YoY for the liquids division. Further, Aegis Logistics announced an ambitious capital expenditure plan for commissioning 25,000 kilo litres (KL) at Kandla in FY25, the full commissioning of 110,000 KL capacity at JNPT by FY25, 71,000 KL capacity to be operational in FY25, and an additional 25,000 KL capacity to be operational in FY25 at Kochi.
In the gas division, two cryogenic LPG projects at Pipavav and Mangalore are progressing on time and within budget. Aegis Logistics will benefit from the ongoing capacity expansion plan to meet the rising import/export demand for liquid and LPG in India. The company commissioned the Kandla LPG project and obtained an additional liquid terminal in Kandla (post-completion of the Vopak JV) in mid-2023, leading to a significant increase in terminal and distribution volumes in FY23 and FY24.
Furthermore, management expects the ongoing capex projects of around ₹21 billion to be completed in FY25, which will further increase its storage capacity.
3. Hitachi Energy
Following the demerger of ABB India’s power grid business unit, Hitachi Energy India was formed to provide product, system, software, and service solutions across the entire power value chain. The company’s portfolio includes an extensive range of high-voltage transformers, grid automation products, and power quality products and systems. As of 4 July 2024, shares of Hitachi Energy have soared by 152%.
This remarkable performance can be attributed to the company securing an order valued at approximately ₹7.9 billion from Hitachi Energy Australia, a fellow subsidiary. This order pertains to the Marinus Link project, which involves voltage source converter (VSC) high-voltage direct current (HVDC) links between Tasmania and Victoria. The company will supply equipment for the Burnie Converter Station and the Latrobe Valley Converter Station, with the order scheduled to be executed over four years.
The Marinus Link project holds national significance for Australia and will play a fundamental role in the country’s energy ecosystem. Hitachi Energy India will play a crucial role in supporting this project. Additionally, shares of the company have been in focus due to Hitachi’s continued work towards three major growth sectors: renewable energy, electrification of Indian railways and metro expansion, and improving connectivity. This strategic positioning has bolstered investor confidence, reflected in the rising share price, as the company stands at the forefront of India’s transformative energy and transportation projects.
4. Housing & Urban Development Corp (HUDCO)
Next on the list is HUDCO, an Indian public sector undertaking engaged in housing finance and infrastructure project finance. The government granted Navratna Status to HUDCO on 18 April 2024. So far in 2024, shares of HUDCO have rallied around 152%, rising from ₹129 in January to ₹324 as of 4 July 2024.
The upcoming budget has sparked significant market interest, coinciding with heightened anticipation. Investors are particularly optimistic about HUDCO due to the government’s robust focus on affordable housing. The budget is expected to introduce measures beneficial to HUDCO and similar state-run firms. Amid this backdrop, a recent report has emerged indicating potential benefits for HUDCO and IREDA. According to a government source, there are discussions about including these entities under section 54EC to enhance investment opportunities.
Additionally, on 11 June 2024, the NDA government announced the expansion of the Pradhan Mantri Awas Yojana by constructing an additional 30 million rural and urban homes. This decision aims to address India’s critical housing needs and meet the growing demand from eligible households across the country. HUDCO aims to increase its assets under management (AUM) to over ₹1.5 trillion by the financial year 2026, up from the current ₹840 billion.
5. Mazagon Dock Shipbuilders
Mazagon Dock Shipbuilders Ltd is a jewel of India’s defence sector, which builds and repairs warships, submarines, and other vessels for the Indian Navy, Coast Guard, and ONGC. The company’s diverse portfolio encompasses cargo ships, passenger liners, water tankers, fishing vessels, destroyers, submarines, and corvettes. So far in 2024, shares of Mazagon Dock Shipbuilders have rallied around 145%, rising from ₹2,283.8 in January to ₹5,600.8 as of 4 July 2024.
This remarkable performance is backed by a strong order book. As of 18 June 2024, the company reported a substantial order book of ₹385.6 billion, making it the country’s largest shipbuilder in terms of revenue and orders. This strong position is largely due to its unique role in the Indian defence sector, specializing in building conventional submarines and destroyers for the Indian Navy.
Mazagon Dock is currently awaiting approval from the Indian government for a submarine project worth ₹200 billion to manufacture three more submarines, the first of which was inducted in 2017. This approval is set to further bolster its order book. The Navy has a fleet requirement of around 175 ships, including next-generation destroyers, corvettes, and frigates. However, Mazagon Dock must compete with other government shipyards and the privately-owned L&T for new projects.
Both Mazagon Dock and L&T are shortlisted for the Indian Navy’s P75I project, which involves manufacturing six more submarines with an air-independent propulsion system (AIP) and lithium-ion batteries. Looking ahead, Mazagon Dock plans to develop a greenfield shipyard at Navi Mumbai with a ship lift, wet basin, workshops, and ship repair facilities.
6. Oracle Financial Services Software
Next on the list is Oracle Financial Services Software (OFSS), majority-owned by Oracle, a world leader in providing IT solutions to the financial services industry. The company develops, sells, and markets computer software and systems and provides consultancy and other IT activities. This midcap stock has risen from around ₹4,336 to ₹10,438 per share, logging around 141% gains in 2024.
This surge followed Oracle Corp.’s strong earnings report in the US, which included better-than-expected bookings and announced partnership deals with tech rivals. Additionally, the positive sentiment around IT stocks has been bolstered by earnings reports from majors like TCS, Wipro, and Infosys.
For Oracle Financial, the growth in the fintech space will remain a key focus. Looking forward, the adoption of AI in financial services and fintech companies is expected to grow at a CAGR of 23.37% over the next two years, presenting a significant opportunity for Oracle Financial as a leader in the AI space.
7. Rail Vikas Nigam Ltd (RVNL)
Next on the list is RVNL, established in 2003 by the Indian government, a critical player in the country’s rail infrastructure development. The company acts as the Ministry of Railways’ execution arm, undertaking various projects, including doubling existing lines, gauge conversion, new line construction, major bridges, and railway electrification. As of 4 July 2024, shares of RVNL have soared by 130% this year.
This growth can be attributed to a significant order win. In May 2024, the company received a letter of acceptance from the Kharagpur division of Southeastern Railway to upgrade the electric traction system from 1×25 KV to 2×25 KV for the Kharagpur Bhadrak section to meet a 3,000 MT loading target. The scope of the project involves all phases of development, including design, supply, erection, testing, and commissioning, with an order value exceeding ₹1.5 billion and expected completion within 18 months.
Apart from this mega order win, strong quarterly earnings have supported positive sentiment in RVNL shares. In Q4FY24, RVNL’s net profit surged 33.2% year-on-year to ₹4.8 billion, compared to ₹3.6 billion in the same period last year, driven by higher revenue and improved operations. The company’s revenue grew 18.8% year-on-year to ₹67.1 billion.
RVNL has ambitious plans for FY25, targeting a topline of over ₹230 billion and a bottom line of ₹16-17 billion. It also aims to significantly expand its order book to ₹1,000 billion.
8. Schneider Electric Infrastructure
Next on the list is Schneider Electric Infrastructure, a subsidiary of Schneider Electric, a French multinational company specializing in energy management and automation. The company’s core business is manufacturing, designing, and distributing technologically advanced products and systems for electricity distribution. Shares of Schneider Electric Infrastructure have surged 128% in 2024, reaching ₹921.7.
This impressive performance follows Schneider Electric Infrastructure’s partnership with Nvidia to optimize data centre infrastructure. Through this partnership, Schneider Electric aims to provide data centre owners and operators with the tools and resources necessary to seamlessly integrate new and evolving AI solutions. In April, the company’s head for the data centres division stated in an interview that demand is expected to grow further, fuelled by the rise of cloud computing, AI, and other data-centric applications. Moving forward, the company plans to focus more on the AI space.
9. NBCC India
Next on the list is NBCC India, a government of India Navratna Enterprise under the Ministry of Housing and Urban Affairs. The company operates in three major segments: project management consultancy, engineering procurement & construction, and real estate. Shares of NBCC have surged 125% in 2024, reaching ₹186.
This surge was driven by several significant order wins. NBCC’s subsidiary received an order worth ₹920 million. Prior to that, the company secured three orders worth ₹3.7 billion in February 2024. Additionally, it received a work order of ₹1.4 billion for HSCC India Ltd to procure lab equipment for the upcoming Himachal Pharma testing lab.
Another factor contributing to NBCC’s share price rise is the government’s affordable housing push in this year’s interim budget. In February 2024, Finance Minister Nirmala Sitharaman announced plans to build 20 million more houses for the rural poor over the next five years under the PM Awas Yojana (Grameen). Looking ahead, NBCC expects around ₹200 billion worth of order inflows in FY25, focusing on PMC and redevelopment projects.
10. Jupiter Wagons
Last on the list is Jupiter Wagons, an integrated railway engineering company specializing in freight wagons and passenger coach items for the Indian Railways. The company offers a range of wagon products, including open wagons, covered wagons, flat wagons, hopper wagons, container wagons, and special-purpose wagons. Additionally, it provides wagon accessories such as alloy steel cast bogies, high tensile centre buffer couplers, and high-capacity draft gears. So far in 2024, shares of Jupiter Wagons have rallied around 125%, rising from ₹319.9 in January to ₹721.2 as of 4 July 2024.
This rally follows the approval received by Jupiter Wagons’ subsidiary, Jupiter Electric Mobility (JEM), from the Automotive Research Association of India (ARAI) to start manufacturing battery-operated light commercial vehicles (LCVs) under the JEM TEZ brand name. For FY24, the company’s total revenue surged by 76.9% year-on-year to ₹36.7 billion, driven by a significant rise in order inflow during the year. As of 31 March 2024, the company’s order book stands at ₹71 billion. This momentum is reflected in the bottom line as well, with net profit climbing a whopping 174.3% to ₹3.3 billion.
Looking ahead, the firm is confident in maintaining this momentum. It expects a growing share of specialized wagons for the steel, cement, and auto sectors, featuring industry-leading designs, which should improve margins.
Conclusion
Investing in top-performing stocks can be appealing, but it’s important to consider several factors before making any investment decisions. High-performing stocks may be overvalued, meaning their prices might be inflated relative to their intrinsic value. It’s essential to assess whether the stock’s current price is justified by its fundamentals.
Understanding market trends is also crucial, as some stocks perform well due to short-term factors that may not be sustainable. Top-performing stocks can also be volatile, so be prepared for price swings and ensure you have a strategy in place for managing such volatility.
Relying solely on top-performing stocks can be risky, so diversifying your portfolio across different sectors and asset classes can help mitigate risk. Conduct thorough research on the company’s financial health, management, and future growth prospects, as past performance does not guarantee future success.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
