Best Large Cap Stocks With High NPM: The Boston Consulting Group (BCG) in 1970 constructed a two-by-two matrix that classifies a business into four categories. The four categories were: Stars, Question Marks, Dogs, and a Cash Cow. For today’s study, we have picked up the last category, The Cash Cow.
A Cash cow is an established business that has already captured a significant market share. It now operates in a market at a decent pace, slower than its fast-growing competitors. Nevertheless, due to its nature of operations, the Company can maintain high Net Profits along with strong return ratios & generally low debt. In this article, we are going to take a look at the Best Large Cap Stocks With High Net Profit Margins and their operations & more.
Large Cap Stocks With High Net Profit Margins
Today we will be looking at a few of these stocks that have established businesses and maintain strong Net Profit Margins. Let’s try to understand what these businesses do and also what are they doing to fuel their future growth.
Large Cap Stocks With High NPM #1 – Oberoi Realty
Oberoi Realty is a real estate developer engaged in constructing luxurious residential Commercial properties and hotels across India. The Company has 4 decades of experience having completed and is currently developing 32.8 million Sq—ft of land as of FY23.
During the year, Oberoi launched Tower G in Sky City Project Borivali (East) Mumbai. The Project is built on a 25 25-acre land Parcel with a carpet area of 4.5 Million Sqft. The project has already sold out 2141 units with a sale value of Rs. 5906 Cr of which Rs. 4369 Cr has been recognized in FY23.
The Company has sold over 4836 residential units so far from its uber-rich residential projects Esquire, Elysian, Eternia, Enigma, Maxima, Sky City, and Three Sixty West for an aggregate of Rs. 25,255 Cr, of which Rs. 21,474 Cr has been recorded as of FY23.
Project Three Sixty West, aimed to be a global icon of Mumbai is developed as a mix-use project in Worli, consisting of 2 high-rise towers. The Company has sold 177 units so far recognizing a revenue of Rs. 8538 Cr with an average unit costing a whopping Rs. 49 Cr.
During the year, Oberoi Realty reported spectacular results scaling its revenue by 56% from Rs. 2752 Cr in FY22 to Rs. 4293 Cr in FY23. Net Profits of the Company scaled at an even better rate of 82% from Rs. 1047 Cr in FY22 to Rs. 1905 Cr in FY23.
The Company reported one of the highest Net Profit Margins at 44.36% while maintaining a Return on Equity of 16.83%. The debt to Equity of the Company stands at a commendable 0.32x, with a return on Capital Employed at 14.4%.
Large Cap Stocks With High NPM #2 – Oracle Financial Services
Oracle Financial Services Software Limited is a subsidiary of Oracle, a world leader in providing financial technology solutions across retail banking, corporate banking, risk, financial crime, and compliance management. It is experienced in solving problems related to global trade, supply chains, and modernizing finance & risk management.
The Company has a vast product portfolio comprising products like Oracle Flexcube Universal Banking, Oracle Flexcube Islamic Banking, Oracle Banking Platform Orale Trade Finance, and multiple other Oracle Banking APIs to allow bank to help their customers better their banking experience their experience.
OFSS makes 52% of its revenues from consulting fees, 33% from maintenance fees, and 15% from licensing fees. The Company makes 37% of its consolidated revenues in the Americas, followed by the European & Middle – Eastern markets at 33%. Asia Pacific is the Company’s smallest market contributing to around 30% of its revenues.
The Company reported a revenue of Rs. 5355 Cr in FY22, which increased by 10% to reach Rs. 5890 Cr in FY23. However, Net Profits went the other way dropping by 4.38% from Rs. 1888 Cr in FY22 to Rs. 1806 Cr in FY23.
Although the Company had disappointing earnings growth, its Net Profit Margins remain at a high of 42%. Its return on Equity & Return on Capital Employed is maintained at 30% & 39% respectively, with a low debt-to-equity ratio of 0.01x.
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Large Cap Stocks With High NPM #3 – NHPC
NHPC is a Mini Ratna category 1 public sector utility Company, which is India’s flagship hydroelectric power generation Company. The Company, along with its subsidiaries has 24 operational hydroelectric projects generating 7 Gigawatts. During the year the Company generated over 24.6 billion units of electricity from these projects.
The Company also has over 16 projects under construction, including both solar & Hydroelectric. These projects are expected to add 10 GW of capacity to the Company’s portfolio. The Company has set aside Rs. 10,857 Cr as Capital Expenditure for executing these projects.
In FY23, the Company signed an MoU to set up a 100 MW floating solar power plant in Uttar Pradesh. A subsidiary of the Company also inked a pact with the state Government to develop a 10 GW Ultra Mega Renewable Energy Power Park in the state of Rajasthan.
During the year, the Company has grown its revenue by 11.64%, from Rs. 10,108 Cr in FY22 to Rs. 11,285 Cr. Sale of Energy increased by 12.79% due to higher generation of power. Plant Availability Factor increased by 88.19% to 88.75% in FY23.
Net Profits during the year scaled by 12.2% from Rs. 3774 Cr in FY22 to Rs. 4235 Cr in FY23. Due to the low operating cost of the business, it can maintain high Net Profit margins of 38%. Despite having strong Net Profit Margins, the Company maintains ROE & ROCE of just 12% and 8% respectively.
Large Cap Stocks With High NPM #4 – Kotak Mahindra Bank
Kotak Mahindra Bank is India’s fourth-largest private sector bank by deposits and third-largest by market capitalization of Rs. 3.7 Lakh Cr. The Bank has deposits worth Rs. 3.62 Lakh Cr and has given out Rs. 3.59 Lakh Cr in Advances.
Kotak offers banking products and financial services in consumer Banking, Commercial Banking, and Asset Reconstruction. The Bank also caters to retail customers providing them with card and two-wheeler loans and Loan against property.
Apart from the usual lending & receiving deposits business, the Bank also has its stock broking division and pension fund division. It is into managing alternative assets for fellow HNI investors.
Kotak has increased its Advances at a rate of 10% and deposits by 13% CAGR in the past 5 years. The Bank has consistently grown its CASA by 13% CAGR since FY19, maintaining its CASA at industry industry-leading rate of 52.8% as of FY23. Kotak has also been successful in maintaining a very low GNPA of just 1.8%.
The Company’s Net Interest Income grew by 25%, from Rs. 22,187 Cr in FY22 to Rs. 27,740 Cr in FY23. During the same period, Net Profits increased by a slightly lower rate of 24%, from Rs. 12,089 Cr in FY19 to Rs. 14,925 Cr in FY23.
Large Cap Stocks With High NPM #5 – Hindustan Zinc
Hindustan Zinc is India’s largest and the world’s second-largest integrated Zinc producer with a 75% market share in India. It is also the 5th largest producer of Silver globally. The Company is partially owned by the Government of India, which holds a 29.5% stake in the Company and Vedanta Ltd, the parent company owns 64.9%.
Hindustan Zinc has access to iron ore mines in 5 districts of Rajasthan and 1 district in Uttarakhand. The Company enjoys a long mine life of 25+ years, with reserves of over 460.05 MT. It has also set up smelters & refineries in strategic locations with the mines. These smelters have an annual capacity of 1.12 MT.
The Company is majorly a producer of refined Zinc, Lead, and Silver with a production capacity of 821 KT, 211 KT, and 714 MT respectively. These metals & Minerals contribute to 74%, 12%, and 13.5% of the Company’s revenue respectively.
Hindustan Zinc earned a revenue of Rs. 35,477 Cr in FY23, which increased by 15.73% from Rs. 30,656 Cr in FY22. Net Profits of the Company slowed to about 9.16%, growing from Rs. 9629 Cr in FY22 to Rs. 10,511 Cr in FY23.
Due to the well-established nature of the business and its ability to generate consistent cash without incurring higher expenses, Hindustan Zinc maintains strong Operating Margins of 55.23% and 29.63%. These earnings coupled with the high ROE & ROCE of 44.53% and 48.5% make investing in the Company a strong proposition.
List of Best Large Cap Stocks With High NPM
The list below puts together the 10 Best Large Cap Stocks with High Net Profit Margins
Conclusion
We now reach the end of our article having briefed you about all the Companies on the list. Before we end the article, we would like to tell you that Net Profit Margins alone are never a strong metric to judge a Company’s performance. A Company can report higher income, due to a sale of assets (A One-off gain), income from which is never recurring.
To avoid being swayed by high NPM, it is always important to identify what exposure Other Income has out of the total income generated in a particular year. Also, along with looking for high margins, it’s always best to find a Company growing at 10%-15% Annually while maintaining these margins.
That’s it from our end. Let us know which is your favourite stock from our list. Do you think that we missed any high NPM Company? Let us know in the comments below.
Written by Nasir Hussain
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