Most Profitable Midcap Stocks. Here are Top 10

From a low of 4% in 2021, inflation has gone up to almost 8% in the last year.

With the government-induced liquidity due to the pandemic, the prices of consumer goods have skyrocketed, creating a hole in our pockets.

Even corporates have been facing the effects of inflation with high input costs and low-profit margins.

Many companies have transferred the burden of increasing costs onto consumers to maintain margins.

However, some companies have expanded their margins despite facing an inflationary environment. Here is a list of 10 such midcap stocks that have managed to stand out above the crowd.

Find out what they did to grow their profits despite facing high inflation.

#1 CRISIL

First on our list of profitable midcap companies is CRISIL.

CRSIL is one of the leading rating agencies in India. It also provides research and risk advisory services.

The company's rating services span an entire range of debt instruments of over 8,000 companies. It has a presence across the globe and draws most of its revenue from North America, India, and Europe.

CRISIL's revenue grew at a compound annual growth rate (CAGR) of 9.6% in the last three years. The net profit has also grown at a CAGR of 10.6% during the same period.

Its operating profit margin expanded by 2.2% in the last three years. CRISIL also saw its net profit margin go up marginally from 19.9% to 20.2% during the same time.

This was mainly because of the higher demand for research reports, which allowed CRISIL to capitalise on the current volatile market conditions.

The company also saw its return on equity (RoE) expand to 30.4% in the financial year 2022 from 28.2% the previous year.

Going forward, CRISIL plans to leverage its parent company's brand (S&P Global) to expand in the international market.

To know more about CRISIL, checkout its factsheet and latest quarterly results.

#2 SRF

Second on our list is a manufacturing company, SRF.

SRF is a diversified manufacturing company. It operates in four different segments - chemical, packaging films, technical textiles, and coated fabrics.

The company has a global presence with presence in over 90 countries. It has 14 manufacturing facilities in four countries, including India, Hungary, Thailand, and South Africa.

SRF's strong presence in the chemicals business has led to continuous investments in this segment to drive growth.

In the last three years, the company's revenue grew at a CAGR of 20%. The net profit jumped 27.3% due to strong growth in its high-margin specialty chemicals business.

Its operating profit margin grew by 4.8%, whereas its net profit margin jumped 2.5% during the last three years.

This was mainly because the company focused on cost reduction through process improvement and optimization of asset utilisation.

Despite a heavy capex, the company's return on capital employed (RoCE) improved to 26.2% in the financial year 2022 from 19.8% the previous year.

Going forward, the company plans to capitalise on 'China plus one' strategy and increase its volumes.

To know more about SRF, checkout its factsheet and latest quarterly results.

#3 Page Industries

Third on our list in Page Industries.

Page Industries is an exclusive licensee of Jockey International in India, Sri Lanka, Nepal, UAE, Bangladesh, and the Republic of Maldives.

The company has an established market position in branded innerwear segment. It also sells swimwear and equipment under the brand name 'Speedo'.

Page Industries had 15 manufacturing facilities in India with 260 m pieces per annum production capacity. The company also has a robust distribution network across India with over 1.1 m retail outlets and an e-commerce presence.

Page Industries' revenue grew in the last three years at a CAGR of 10.8%, led by strong demand for branded innerwear post-pandemic. The net profit grew at a CAGR of 16.1% due to low operating expenses.

Page Industries witnessed an expansion in operating profit margin by 1.5% in the last three years.

This was mainly because the company undertook calibrated price increases. Moreover, it took strong measures to control the budget and expenses.

It also utilised its inventories optimally, leading to an expansion in its net profit margin from 11.7% in 2020 to 13.3% in the financial year 2022.

Page Industries also expanded its RoCE to 68.2% in the recent financial year despite investing in a new plant in Odisha.

Going forward, the company is expanding its manufacturing capabilities to meet the growing demand for branded innerwear.

To know more about Page Industries, checkout its factsheet and latest quarterly results.

#4 PI Industries

Next on our list is a company in the agrochemicals industry, PI Industries.

PI Industries is one of the leading players in the agrochemicals space. It has a broad product portfolio of chemicals which it manufactures in four different locations.

It has a strong presence in both domestic and export markets. The company also has an extensive distribution network of over 100 thousand retailers.

PI Industries also expanded into the pharma business and successfully developed a Covid-19 drug intermediate.

In the last three years, the company's revenue grew at a CAGR of 14.7%. The net profit increased by 21.6% during the same period.

Moreover, its operating profit margin grew by 2.2% and net profit margin improved by 1.6% in the last three years. This was mainly driven by price increases of high-growth products and strong demand for agrochemicals.

The RoCE also expanded by 3.5% to 20.8% in the financial year 2022.

Going forward, the company plans to expand its revenue through volume growth by building its product portfolio.

To know more about PI Industries, checkout its factsheet and latest quarterly results.

#5 Astral

Fifth on our list is Astral Limited.

Astral manufactures pipes and fittings for plumbing, sewerage, fire sprinklers, and ducting.

The company also ventured into the adhesives business. Its products in this segment include solvent cement, putty, and tapes.

It has 12 manufacturing facilities in India and abroad. The total manufacturing capacity is 247 thousand tons for pipes and 87 thousand tons for adhesives.

It also has a strong dealer and distributor network for both its businesses.

In the last three years, Astral's revenue grew at a CAGR of 19.6%, driven by solid volume growth in the adhesives business. The net profit also jumped by 25.1%.

Though the company maintained its operating profit margin at 17.2% in the last three years, its net profit margin expanded by 1.5%.

This was due to growth in volumes and realisations. Moreover, the company also tackled inflation in specific categories.

Astral's RoCE also improved by 6.4% to 28% in the last two years.

Going forward, the company is planning to grow in the paints segment with the acquisition of Gem Paints.

To know more about Astral, checkout its factsheet and latest quarterly results.

#6 P&G Hygiene

Sixth on our list of profitable midcap companies is P&G Hygiene.

P&G Hygiene manufactures and sells branded FMCG products. Its business is mainly categorised into two segments - hygiene and healthcare.

Its well-known brands include Whisper, Oral B, Vicks, Olay, and Old Spice. It has two manufacturing facilities and an extensive distribution network in India.

In the last three years, its revenue grew at a CAGR of 6.4%. The net profit also grew by 15.9% during the same time.

P&G Hygiene's operating profit margin grew from 20.6% to 24.7% in the last three years. The net profit margin also expanded by 4%. This was mainly due to growth in its healthcare segment and a decline in advertising expenditure.

P&G also reported a high RoCE of 93.6% in the recent fiscal.

Going forward, the company plans to capitalize on its strong brand image and further penetrate the rural markets.

To know more about P&G Hygiene, checkout its factsheet and latest quarterly results.

#7 Mindtree

Next on our list is an IT company, Mindtree.

Mindtree is a global technology solution provider. The company offers a host of services, including blockchain, cloud, consulting, and transformation services.

It serves clients in several industries, including banking, insurance, manufacturing, and health.

In the last three years, Mindtree's revenue grew at a CAGR of 11.4%, driven by a high need for digital transformation post-Covid. The net profit also jumped 37.9% during the same time.

Its operating profit margin and net profit margin also expanded by 7% and 7.6% respectively in the last three years.

This was mainly because of the lower travel-related expenses, a decline in sub-contractor costs, and cost efficiency measures taken by the company.

Mindtree's RoE improved by 4.6% and stood at 30.4% in the financial year 2022.

Going forward, a strong order book will drive the revenue and margins in the medium term.

To know more about Mindtree, checkout its factsheet and latest quarterly results.

#8 Gillette India

Eight on our list is another FMCG company, Gillette India.

Gillette manufactures and sells FMCG products in the grooming and oral care segment. It has an extensive product portfolio of razors, blades, shaving gels, and creams. Some of its well-known brands are Fusion5, MACH3, and Guard3.

Being a subsidiary of P&G USA, Gillette benefits from its global reach. Gillette has an extensive distribution network comprising drug stores, department stores, and grocery stores.

In the last three years, its revenue grew at a modest rate of 2.8% (CAGR). However, its net profit grew at a CAGR of 7.1%.

Gillette's operating profit margin expanded by 2.4% in the last three years. The net profit margin also expanded by 1.8% during the same time which was mainly driven by volume growth in the grooming segment.

Its RoCE stood at 51.1% in 2022 against 35.3% the previous year.

Going forward, the company will continue to improve its sales and strengthen its fundamentals.

To know more about Gillette India, checkout its factsheet and latest quarterly results.

#9 Cummins India

Ninth on our list is Cummins India.

Cummins designs, manufactures, and sells diesel and alternative fuel engines, generators, and related accessories. It also provides after-sale services.

The company has a strong domestic presence. Being a part of Cummins USA, it also has a global presence and exports to the USA, UK, Mexico, China, and Singapore.

Cummins India serves over 225 thousand customers through a network of more than 120 dealers.

In the last three years, its revenue grew at a steady rate of 5.6%. However, its net profit grew at a CAGR of 13%.

Due to various cost optimization measures taken by the company, its operating profit margin grew by 5.5%. The net profit margin also expanded by 2.5% in the last three years.

Its RoCE stood at 21.9% in the financial year 2022, against 15.7% the previous year.

Going forward, the company plans to increase its presence in the fishing boat segment.

To know more about Cummins India, checkout its factsheet and latest quarterly results.

#10 Abbott India

Last on our list of profitable midcap companies is Abbott India.

Abbott India is a pharmaceutical company with a global presence in over 160 countries.

It has a portfolio of over 125 products in various therapeutic areas, including gastroenterology, pain management and vitamins.

The company has several brands that are market leaders in their respective segments. Abbott India has a robust distribution network of over 6m retailers and 8,600 stockists.

Abbott India's revenue grew at a CAGR of 5.9% in the last three years. The net profit also jumped by 10.4% during the same period.

It saw a growth in volume and price realisations in the last three years, which led to an expansion in operating profit margin by 3.6%. The net profit margin also improved by 1.7% during the same time period.

Its RoCE improved by 2.7% in the financial year 2022 to 39.6%.

Going forward, the company is focusing on over-the-counter medicines to get into affordable health products. It is also expanding its distribution reach via modern pharmacy chains and e-pharmacies.

To know more about Abbott India, checkout its factsheet and latest quarterly results.

Should you invest in high-profit companies?

If you are an avid investor, there is no doubt that you should check the financials of a company before investing.

A high-profit margin or profit growth looks very attractive. However, along with profit growth, you must also look at other factors.

Check the company's promoter holding and pledged percentage. Ideally, the promoter holding should be greater than 45% with no shares pledged.

You must also check the company's debt-to-equity ratio. A company can assure consistency in profit growth only if the outside obligations are low or nil. Hence look for companies with low debt to equity ratio.

Along with this, you must ensure that the company's return ratios (RoCE and RoE) are above 15%.

Finally, check the company's cash conversion cycle. A profitable company should also be able to convert those profits into cash. Ideally, the cash conversion cycle should be below 100 days.

If high-profit stocks meet all these criteria, then you can go ahead and consider adding them to your watchlist.

Remember that investing in stock markets can be risky, and you must proceed with caution.

Happy investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...