Imagine putting ₹1 lakh into two publicly traded companies five years ago; today, that investment could be worth over ₹50 lakh, reflecting an astonishing compound annual growth rate of 118%. Stocks that successfully pivot their operations or thrive in booming sectors can deliver such impressive returns in a short span. However, pinpointing these opportunities early and maintaining your investment through market fluctuations can be challenging. Here’s a closer look at two remarkable stocks that have multiplied in value by more than 50 times over the past five years.

CG Power and Industrial Solutions

Founded 86 years ago, CG Power and Industrial Solutions has established itself as a frontrunner in the electrical engineering sector. The company operates primarily in two segments: industrial systems and power systems. They manufacture essential components like traction motors and signaling relays for Indian Railways, along with a diverse array of products for both industrial and power sectors, including induction motors and transformers. Recently, CG Power has also entered the consumer appliances market, producing fans and water heaters.

A Remarkable Turnaround

In the years leading up to 2021, CG Power faced significant financial challenges, witnessing a revenue decline from ₹121 billion in FY13 to ₹29.6 billion in FY21. This downturn was exacerbated by accounting irregularities that came to light. However, a pivotal moment occurred in 2020 when the Murugappa Group acquired CG Power, investing ₹7 billion and restructuring its management.

• Revenue Growth: Post-acquisition, CG Power’s revenue surged 2.7 times, reaching ₹80 billion in FY24.
• Profit Recovery: After a dip to ₹9.1 billion in FY22, profits rebounded by 56%, hitting ₹14 billion in FY24.

The company’s consolidated EBITDA also saw a rise, climbing to ₹11.3 billion in FY24, with a consistent EBITDA margin of 14%. Notably, the power segment’s margin improved to 17%, thanks to better product mix and cost efficiencies.

Future Prospects

Looking to the future, CG Power maintains a robust order book that provides a clear pathway for revenue growth. As of Q3 FY25, the industrial segment holds an order backlog of ₹29.7 billion, a 50% increase from the previous year, and the power segment boasts an impressive backlog of ₹58.8 billion, up 67% year-on-year. The company is set to invest ₹7.1 billion in establishing a new transformer manufacturing unit, positioning itself to meet the rising demand in both domestic and international markets.

CG Power trades at a price-to-earnings (P/E) ratio of 93x, which is 24% above its 10-year average of 74x. This premium reflects the company’s strong turnaround and performance.

Bombay Stock Exchange

Established in 1875, the Bombay Stock Exchange (BSE) is not just India’s first stock exchange but also the oldest in Asia. It holds the title of the Fastest Stock Exchange globally, boasting an impressive transaction speed of just 6 microseconds.

Diverse Revenue Streams

BSE enjoys a well-diversified revenue model, with transaction fees constituting 42% of its ₹13,901 million revenue for FY24. Other significant revenue contributors include corporate services at 25%, and treasury income at 13%.

• Transaction Fees Surge: Transaction fees more than doubled to ₹5,827 million in FY24, driven by a surge in trading volumes and investor activity.
• Mutual Fund Leadership: BSE leads in mutual fund distribution via its BSE STAR platform, commanding an 85% market share among exchange-based platforms.

Stellar Financial Performance

BSE’s revenue skyrocketed by 70% year-on-year to ₹16,180 million in FY24, with net profit doubling to ₹4,109 million. The momentum continued into 9MFY25, showcasing a remarkable 118% revenue growth and 173% profit growth.

Strategic Expansion Plans

Moving forward, the BSE aims to capture an even larger market share by tapping into the growing investor base and increasing trading volumes through enhanced services. The exchange also plans to expand its BSE StAR platform to provide cost-effective solutions for investors.

With a current P/E ratio of 86, significantly higher than its 10-year median of 29, BSE has experienced a notable re-rating due to its impressive financial performance. However, this elevated valuation means investors should stay cautious and focus on sustained earnings growth.

Conclusion

Both CG Power and BSE have shown extraordinary growth over the past five years, driven by strategic turnarounds and favorable market conditions. While their historical performance is commendable, current valuations indicate that much of the future potential may already be reflected in their stock prices. Ongoing earnings growth and effective execution of their strategies will be crucial for justifying these elevated valuations in the coming years.

Disclaimer

This article serves merely as an informational piece and should not be construed as investment advice. It is highly recommended that individuals consult with financial advisors before making any investment decisions.

By exploring these companies, investors can gain insights into the dynamics of the market and the potential for significant returns in the equity landscape.