Top 5 Stocks That Could Turnaround in 2025

Be fearful when others are greedy and be greedy only when others are fearful. -Warren Buffett

After an extended period of bull run, the latter half of 2024 has been the year of some serious market correction.

The reasons are not very hard to guess... rich valuations, higher inflation, FII outflows and muted corporate earnings for India Inc.

In such a period, investors are often advised to buy the dip. However, it is impossible to time the market and often difficult to identify if the market downturns are over.

In such a scenario, an often-overlooked strategy is to focus on turnaround stocks.

These are companies that may have struggled due to poor performance, unfavorable market conditions, or operational inefficiencies but show promising signs of recovery.

Through careful research, we aim to determine if this downturn could set the stage for a promising rebound.

Please note that these stocks are not recommendations from our side and investors are requested to do their own research and due diligence.

The common feature among these stocks? They currently stand in a 'Heads I win, Tails I don't lose much' situation.

Put differently, while the downside from here may not be much, there could be a good upside for the taking if the operational performances of these stocks turn around.

Take a look...

#1 UPL

First on this list is UPL.

UPL is engaged in the business of agrochemicals, industrial chemicals, chemical intermediates, specialty chemicals, and the production and sale of field crops and vegetable seeds.

The company is a leading provider of agricultural solutions and services, with 14,236 registered products, and 1,884 patents granted across the globe, a presence in around 140 countries, and access to 90% of the world's food basket.

UPL's products include crop protection chemicals like insecticides, fungicides, herbicides, etc., and seeds and bio-solutions.

UPL is the fifth largest agrochemical company globally with forty-three manufacturing facilities across the globe.

Its agri-tech platform 'Nurture' connects with around 3 million (m) registered farmers, 85,000+ retailers, and 25,000 dealers.

In FY23, for the sake of corporate realignment, UPL created two platforms -

Crop Protection Business under UPL Sustainable Agri Solutions (UPL SAS): Under this arrangement, UPL SAS acquired UPL's Crop Protection Business in India through a slump sale. It transferred the business for a lump sum consideration without assigning individual asset and liability values.

Advanta Seeds Business under Advanta Enterprises: It received an investment of US$ 300 m from KKR for a stake of 13.33%. It operates in the hybrid seed business having 900+ hybrid seed varieties across 40+ crops.

Through its subsidiary UPL Specialty Chemicals, the company also supplies high-quality agrochemical active ingredients and specialty chemicals to UPL Group companies and 600+ other external B2B clients.

UPL has around 30 research and development (R&D) facilities spread across the world and the company spends around 3% of its sales on R&D.

In 2024 so far, shares of UPL have fallen 5%.

Here's a table showing the company's historical financials...

Financial Snapshot of UPL

Rs m, consolidated	FY22	FY23	FY24	Q1 FY25	Q2 FY25
Net Sales	462,400	535,760	430,980	90,670	110,900
Growth (%)	20%	16%	-20%	-36%	22%
Operating Profit	95,290	101,960	42,970	10,690	12,170
OPM (%)	21%	19%	10%	12%	11%
Net Profit	44,370	44,140	-18,780	-5,270	-5,850
Net Margin (%)	10%	8%	-4%	-6%	-5%
Earnings per share (EPS)	47.5	47.6	-16	-5.1	-5.9

Data Source: Screener.in

In Q2FY25, the company faced challenges from pricing pressure, an unfavorable regional mix, and the bankruptcy of a key customer, leading to a higher provision for expected credit loss (ECL) in the Latin America (LATAM) region.

UPL's profit after tax (PAT) worsened due to the non-recognition of deferred tax assets (DTA) and the reversal of DTA in certain countries, which had been recognized in the previous year.

Despite pricing pressure from overcapacity in China and tight grower margins, the company has maintained and grown market share across most regions, with strong customer preference and above-industry volume growth in H1FY25.

The company's outlook for Q3FY25 and the full year of FY25 includes:

1. UPL continues to expect the price of key products to largely remain stable. While headwinds are expected on account of softness in the agri-commodity prices, the freight expenses that were higher in the first half of this year are likely to normalize in the second half to previous levels.
2. To achieve revenue growth of 4-8% (as guided by the management for the full year), revenue growth of 8-10% will be required in the second half. To achieve earnings before interest, tax, depreciation, and amortization (EBITDA) increase of 50% for the full year, that would imply the EBITDA margins at about 21% for the second half.
3. The improvement stems from getting rid of high-cost inventory and replacing it with lower-cost stock, boosting contribution margins. Increased sales of differentiated products (having higher revenue contribution) with higher margins, a stronger regional mix (notably in the high-margin US market, which is showing signs of recovery), a larger second half for global crop protection, and higher market share in key regions will also drive growth.
4. For first half of FY25, UPL saw volume growth of 16% and a price degrowth of 10%. Their expectation for the second half of the year is that both of those trends will start to reduce. Their volume growth will no longer be in the double-digit range. It will likely be kind of in the mid-single digits. But likewise, the pricing headwinds that they've experienced in the first half will largely dissipate.
5. In H1FY25, volume grew 16% while prices declined 10%. In H2, volume growth is expected to slow to mid-single digits, with pricing headwinds easing. For FY26, volume growth is projected at 5% or less.
6. UPL has guided for Rs 18 billion (bn) in capex but have spent only Rs 7 bn so far.
7. With a continued focus on improving working capital, UPL is well on track to generate operational free cash flows of US$ 300-400 m, which will help reduce outstanding debt.
8. The company has an US$ 8.5 billion product pipeline at various stages of development, targeting diverse regions and crop combinations. With this pipeline, the company aims to boost its innovation rate from 14% to 24% by FY27 and achieve 50% of revenue from differentiated and sustainable products within the same period.

To know more, check out UPL's financial factsheet.

#2 GMR Airports

Second on this list is GMR Airports.

GMR Airports is mainly engaged in the development, maintenance, and operation of airports, the generation of power, coal mining and exploration activities, development of highways, development, maintenance, and operation of special economic zones, and construction business.

The company is the largest private airport operator in India, the largest in Asia, and the second largest globally. It ranks ninth in terms of the number of airport assets under operation or in various stages of development. In FY24, it held a 27% share of passenger traffic in India.

The company's portfolio of airport assets includes Delhi, Hyderabad, North-Goa, and Medan (Indonesia) airports. It also extends its technical services to Mactan Cebu International Airport in the Philippines. The company has a total operational passenger capacity of 142 million (m).

The company has around 2,520 acres of land bank with real estate development potential across its airport portfolio.

In the past 1 year, GMR Airports share price has gained 38%.

Here's a table showing the company's historical financials...

Financial Snapshot of GMR Airports

Rs m, consolidated	FY22	FY23	FY24	Q1 FY25	Q2 FY25
Net Sales	46,010	66,740	87,550	24,020	24,950
Growth (%)	29%	45%	31%	-2%	4%
Operating Profit	21,060	17,270	29,720	8,960	8,590
OPM (%)	46%	26%	34%	37%	34%
Net Profit	-11,310	-8,400	-8,280	-3,380	-4,290
Net Margin (%)	-25%	-13%	-9%	-14%	-17%
Earnings per share (EPS)	-1.7	-0.3	-0.9	-0.2	-0.3

Data Source: Screener.in

In Q2FY25, total income grew due to higher traffic and tariffs but increased finance costs and depreciation from Delhi and Hyderabad airport expansions led to a loss from continuing operations.

The company's outlook for the full year of FY25 includes:

1. The company is close to cash break-even and expects improvement with traffic growth and tariff revisions at Delhi Airport, thus, improving its financial position in the future.
2. The non-aero revenues at Hyderabad Airport were flat in Q2FY25, both year-on-year (YoY) and quarter-on-quarter (QoQ), due to ongoing capacity expansion, renovations of older stores, and the addition of new retail and the foods and beverages (F&B) outlets. These new stores are expected to be operational in the next two quarters, leading to increased spend per passenger in the upcoming future.
3. The increase in interest costs for Delhi in Q2FY25 was due to the refinancing of Rs 25 bn, which involved canceling old hedges and incurring a one-time charge and an additional Foreign Currency Convertible Bond (FCCB), totaling to about Rs 1.2 bn additional interest. With the new refinancing rate of 9.5%, down from 11.5%, interest costs will decrease in the future.
4. The portion of EBITDA not related to Delhi, Hyderabad, or Goa airports has grown significantly YoY, driven by the company’s standalone operations, its airport subsidiaries (in the form of joint ventures), and Maintenance, Repair, and Overhaul (MRO) facility. With strong performance from these subsidiaries and MRO, overall EBITDA growth is expected to outpace that of the three airports moving forward. The EBITDA at the standalone level by FY26-27 should in all probability surpass around Rs 10 bn.
5. With many adjacent businesses now moved to GMR Airports, this entity has transitioned from a holding company to an operating company. As an operating entity, it generates significant cash flow from its duty-free, cargo, and other businesses. This improved cash flow will likely lead to a substantial reduction in refinancing costs in the next round, resulting in lower interest costs at the standalone company level moving forward.
6. Following the acquisition of a 10% stake in Delhi Airports from Fraport AG Frankfurt Airport Services Worldwide, debt will rise by Rs 10 billion to Rs 60 billion, marking the peak level. However, with dividend flows from assets like Hyderabad, cash flows from non-aero businesses, management fees, and receivables, the company is confident to fully repay the debt within the next three to five years.
7. The company is developing greenfield airports in Bhogapuram (Visakhapatnam), and Crete (Greece) with a total passenger capacity under development of 46 m. As of September 2024, Bhogapuram is 42% complete, Mopa (Goa) is 99% finished with commissioning expected in Q3 FY25, and Crete is 40% complete.
8. For Bhogapuram Greenfield airport, the total capex of Rs 12-13 bn is expected by the end of FY25, with Rs 8 bn already spent this year. The operational capex is projected at Rs 2.5-3.5 bn annually for Delhi and Hyderabad airports.
9. The company aims to strengthen its non-aero adjacency businesses at the platform level by selectively engaging in upcoming opportunities at both GMR and non-GMR airports. It also plans to pursue capex-light opportunities primarily in India, South and Southeast Asia, and the Middle East.

To know more, check out GMR Airports financial factsheet.

#3 Kajaria Ceramics

Next on this list is Kajaria Ceramics.

Kajaria Ceramics is primarily engaged in the manufacturing and trading of ceramic and vitrified tiles in India.

It is the largest manufacturer of ceramic/ vitrified tiles in India and the eighth largest in the world.

The company's product portfolio mainly includes ceramic wall & floor tiles, polished & glazed vitrified tiles, bath-ware solutions, and plywood & laminates.

The company sells its products under 3 main brands i.e. Kajaria (for tiles), Kerovit (for sanitaryware and bath ware solutions), and Kajaria Ply (for plywood and laminates).

The company has a well-established dealer network with 1,850 dealers of which 400 have exclusive showrooms.

In the past one year, the company's stock price has fallen 10%.

Here's a table showing the company's historical financials...

Financial Snapshot of Kajaria Ceramics

Rs m, consolidated	FY22	FY23	FY24	Q1 FY25	Q2 FY25
Net Sales	37,050	43,820	45,780	11,140	11,790
Growth (%)	33%	18%	4%	-10%	6%
Operating Profit	6,120	5,930	6,980	1,650	1,560
OPM (%)	17%	14%	15%	15%	13%
Net Profit	3,830	3,460	4,320	920	860
Net Margin (%)	10%	8%	9%	8%	7%
Earnings per share (EPS)	23.7	21.6	26.5	5.6	5.3

Data Source: Screener.in

The company experienced muted margins reported by the bathware division, which was largely attributable to losses incurred in the recently commissioned Sanitaryware unit in Morbi.

India's tile exports declined by 15% in the first five months of the current year, totaling Rs 7.4 billion compared to Rs 8.7 billion during the same period last year. This decline was primarily due to a sharp increase in ocean freight rates, driven by the ongoing Red Sea crisis and a shortage of container availability.

The gross margins fell due to a drop in realizations to the extent of 3% YoY and a 90 bps QoQ, mainly driven by a higher outsourcing mix, which increased from 23% to 26%.

The company experienced softness in the faucet segment due to rising metal prices, which it couldn't fully pass on in Q2. As price adjustments typically occur with a lag, the company expects to recover this impact in the next quarter.

The company's outlook for the full year of FY25 includes:

1. The tile industry experienced a subdued Q2 due to ongoing weakness in the domestic market and excessive rainfall in August and September. However, the management expects demand to pick up in the H2FY25. The dealer feedback is positive, with increasing demand driven by real estate projects.
2. In Q2FY25, the industry has grown at about 2-3% domestically, whereas the company has grown by 8.5% QoQ. Thus, the company expects to achieve 5-6% higher volume growth than the industry in the future as well.
3. The operating profit margin (OPM) decline in Q2FY25 vs Q1FY25 was primarily due to two factors: the installation of a tile unit for Keronite, which is still in the stabilization phase, and the bathware division, where a new plant was under stabilization. Both are now stabilizing and as the Keronite tile division improves its utilization from 38%, margins are expected to improve.
4. Currently, other expenses have increased, but as volumes rise, these expenses are not expected to grow at the same pace. This will provide operating leverage going forward.
5. The overall volume growth for tiles division, this year is expected to be between 9-10%, with 8% achieved in quarter one and 8.5% in quarter two. OPM guidance for the year remains at the lower end of the 15-17% range previously provided.
6. The government business as a percentage of overall sales volume was 10% last year, is expected to be 12-13% this year and is expected to reach 15% next year, without damaging the receivables days.
7. The bathware division saw a 5.7% growth this quarter, and the company projects a 15% revenue growth for the full year.
8. The capex for the year is Rs 2 bn, with Rs 1.6 bn allocated for domestic purposes (maintenance and construction of a new office building) and Rs 0.4 bn for a ceramics plant in Nepal. Of the total Rs 2 bn, Rs 1.4 bn has already been spent in H1FY25, comprising Rs 1 bn for domestic projects and Rs 0.3 bn for Nepal.
9. The company is currently focusing on branding and improving the quality of its distribution network and value-added products.
10. The company plans to reduce the working capital cycle from 59 days to 50 days by the end of the financial year & the reduction will come from both receivables and inventory management.

To know more, check out Kajaria Ceramics financial factsheet.

#4 Bata India

Fourth is Bata India.

Bata India is primarily engaged in the business of manufacturing and trading of footwear and accessories through its retail and wholesale network.

As of June 2024, the Bata Corporation holds a 50% stake in the company. Founded in 1894 in the Czech Republic, Bata Corporation is the world's leading shoemaker by volume having a retail presence of over 5,300 shops in more than 70 countries across 5 continents and operates 21 production facilities in 18 countries.

The company is the largest footwear retailer and leading manufacturer in the Indian footwear industry, having a network of 13,500+ multi-brand outlets (MBO) & 400+ distributors across 1560 towns.

The company has 4 manufacturing units in Kolkata, Bihar, Bangalore & Tamil Nadu. It has a manufacturing capacity to produce 21 m footwear per annum.

The brands offered by Bata include Bata, Power, Marie Claire, North Star, Naturaiser, Scholl, Bata Comfit, Weinbreneer, Hush Puppies, etc.

The company focuses on an asset-light model of operations by opening more franchise stores compared to company-owned and company-operated (COCO) stores and remodeling the existing ones. As of Q2FY25, it has a network of 600 franchise stores and 1,355 COCO stores. The company renovated 180+ stores in FY24.

700+ enterprises provide Bata shoes to their employee/customers through its B2B Division.

The company has one of the largest omni-network (home delivery) in India covering 1,700+ stores. This channel contributed to 1 m+ pairs of sales in FY24. Its e-commerce marketplaces business registered a growth of 41% year on year (YoY) and Bata.com registered a growth of 31% YoY in FY24.

In the past 1 year, shares of the company have fallen 20%.

Here's a table showing Bata's historical financials...

Financial Snapshot of Bata

Rs m, consolidated	FY22	FY23	FY24	Q1 FY25	Q2 FY25
Net Sales	23,880	34,520	34,790	9,450	8,370
Growth (%)	40%	45%	1%	18%	-11%
Operating Profit	4,270	8,040	7,970	1,850	1,750
OPM (%)	18%	23%	23%	20%	21%
Net Profit	1,030	3,230	2,630	1,740	520
Net Margin (%)	4%	9%	8%	18%	6%
Earnings per share (EPS)	8	25.1	20.4	13.5	4

Data Source: Screener.in

The company's outlook for the full year of FY25 includes:

1. In FY24, the company launched its first Power-exclusive brand outlet (EBO) in Noida, with plans to expand to 10 stores by December 2024. Additionally, it introduced Power athleisure apparel in India, which is currently available in 70 stores, with plans to reach 100 stores by December 2024.
2. The company tied up with ABG brands in 2023 and launched Nine West, a premium brand during Q4FY24 by launching 40 stores and it is planning to add 30 new stores by the end of Q3FY25.
3. The company has opened 14 Floatz kiosks, with plans to expand to 26 by December 2024. It currently averages 27,000 pairs sold weekly under the Floatz brand, which now contributes approximately 3% of e-commerce revenue. Additionally, Sneaker Studios has been implemented in 756 stores.
4. The company’s business strategy is focused on premium brands like Hush Puppies, Power, Northstar, Comfit, etc. which contribute 40% of revenue as of FY24.
5. To stay nimble on costs, the new store sizes are codified to be about 30% smaller in malls, and 20% on high streets.
6. The company has launched a "Zero-Based Merchandising" initiative, aimed at decluttering stores by customizing merchandise to local customer profiles. This strategy improves brand communication, highlights new collections, and streamlines fixtures and messaging for a better customer experience. Currently implemented in 8 stores, 2 of these saw a 60% reduction in product lines, boosting sales per square foot by nearly 20%. The company plans to expand this initiative to its top 250 stores over the next few years.
7. The company has adopted inventory tightening both in terms of quantity & quality driven through complexity reduction.
8. The company saw stronger demand from lower-tier towns and higher price points. Over the past four quarters, the contribution from products priced under Rs.1,000 decreased from 40% to 30%. For example, the Power series, Easyslide, performed exceptionally well, despite being priced 2-2.5 times higher than the company's average selling price, as it offered significant value-priced at nearly 50% of competitors' prices. This strategy may support further premiumization of the brand.
9. The company currently sources 25% of its products in-house and outsources 75%. It plans to reduce the number of sourcing partners from 100 to 50-60 to streamline operations, improve engagement and product development, and achieve economies of scale in quality and service levels.
10. The company has increased investments in in-house manufacturing, focusing on backend capacities, automation, and capex-driven facilities, including designs and molds. Additionally, it plans to launch more collaborations, building on successful partnerships like Marvel Disney, Peanuts, and Emily in Paris from previous quarters.
11. The company’s gross margin dropped by 140 basis points due to the expansion of lower-margin franchise and e-commerce networks and inventory reduction investments. However, management expects margins to improve in the medium term.

To know more, check out Bata India financial factsheet.

#5 Responsive Industries

Next on this list is Responsive Industries.

Responsive Industries, incorporated in 1982 is a leading India-based manufacturer of polyvinyl chloride (PVC)-based products.

The company offers a diverse product range, including luxury vinyl planks, resilient vinyl sheets, synthetic leather, synthetic ropes, and waterproof membranes.

Luxury vinyl planks and synthetic leather are used across various industries, such as residential and commercial spaces, healthcare, transportation, etc.

The company is the largest vinyl flooring manufacturer in India and ranks among the top five producers globally.

The company serves 25 end-user industries and has over 100 distributors in India, and 300 international distributors across more than 70 countries. It offers over 30 product categories and maintains relationships with 500 architects.

A few of its clients include Narayana Health, Wockhardt Hospitals, Seven Hills Hospitals, American School of Bombay, Escola Nacional de Bombeiros, Qatar University, Indian Railways, BEST, Volvo, etc.

The company has a manufacturing capacity of 10,000 MT/month in Boisar, Maharashtra.

In the past 1 year, shares of the company have fallen 22%.

While the industry average price to earnings multiple (PE) is 34.3x compared to the current stock P/E of 36.9x, the stock's current PE is significantly lower than its 3, 5, and 10-year average median PE.

Here's a table showing the company's historical financials...

Financial Snapshot of Responsive Industries

Rs m, consolidated	FY22	FY23	FY24	Q1 FY25	Q2 FY25
Net Sales	11,030	9,740	10,870	3,200	3,500
Growth (%)	46%	-12%	12%	11%	9%
Operating Profit	1,100	1,100	2,440	710	730
OPM (%)	10%	11%	22%	22%	21%
Net Profit	0	240	1,610	480	490
Net Margin (%)	0%	2%	15%	15%	14%
Earnings per share (EPS)	0	0.9	6.1	1.8	1.9

Data Source: Screener.in

The company's outlook for the full year of FY25 includes:

1. In FY24, the operating margin increased to 22% from 11% last year, driven by a focus on higher-quality products and customers. Servicing the quality product needs of Vande Bharat contributed to this margin expansion. The company is achieving similar margins in both domestic and international markets.
2. The company plans to establish over 100 customer experience centers in the next three years, using a combination of company-owned and franchisee models. It is targeting to place Luxury Vinyl Plank across 2,500 store outlets in the next 3-5 years.
3. The company targets a top line of Rs 25,000 m with an EBITDA margin of 22-23% in the next 3 years. It is expanding the distribution network with dealers in the other flooring (wooden, laminates, carpet tiles, etc.) segments.
4. The company has no long-term debt and plans to maintain this position for the foreseeable future.
5. The company currently has 55-60% capacity utilization and thus, doesn’t plan to incur capital expenditure for the next 2-3 years until its utilization reaches 100%.
6. In terms of export growth, the company continues to expand its network of distributors, retailers, and retail touchpoints.
7. The strong push for e-buses and full-order books of companies like Tata and Marcopolo is a positive development for major service vendors like Responsive Industries.

To know more, check out Responsive Industries financial factsheet.

Conclusion

All of these companies have faced various issues like pricing pressure, increases in interest costs, and even some one-off events.

Despite all of these factors, there have been certain signs of improvement or hope given by the management for improvement in the future.

As we move into 2025, there is strong potential for a recovery, fuelled by stabilizing commodity prices, rebounding demand, and growth in sectors.

Long-term investors might identify this as an opportunity to take advantage of stocks presenting the potential for a turnaround.

Happy Investing.

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

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