Two Indian stocks for retirements - possible? Lets check

Articles > Submitted by PatientInvestor on 1/9/2021 | Views: 1421

In this article, I am going to demonstrate the reality check of two Indian stocks that has created immense wealth in last 20 years and expected to create more wealth in next decade than it has created earlier. Lets check the fact and figures.

Table of Contents

    When we think about retirements, we wanted to be 100% sure about the money we keep. We do not want to take risks of that money whatever the case may. Thinking all these in mind, when I was trying to scan companies to invest in for retirement portfolio, I wanted to be 100% sure about following

    1. Solid and growth oriented management 
    2. No corporate governance issue
    3. No risks of disruptions in businesses
    4. Solid past track records
    5. Bright future in terms of business potential
    6. Solid and very solid balance sheet

    As more and more businesses are getting obsolete in the hi-tech world so natually my more focus was on technology and I happen to look at following two companies

    • Honeywell Automation India Ltd.
    • L&T Technology Services Ltd.

    Lets see their past performances one by one

    Honeywell Automation India Ltd.

    As per their official website, Honeywell Automation India Limited (HAIL) is a ~$350 million+ company listed on the BSE and the NSE. It was incorporated in India in 1984 and its registered office in Hadapsar, Pune. HAIL is a leader in providing integrated automation and software solutions, including process solutions and building solutions. It has a wide product portfolio in environmental and combustion controls, and sensing and control, and also provides engineering services in the field of automation and control to global clients. A Fortune India 500 company, HAIL has more than 3,000 employees across India – Pune, Bangalore, Hyderabad, Mumbai, Chennai, Gurgaon, Kolkata, Jamshedpur and Vadodara.

    Lets look at their chart of past two decades

    Jan 2003 to Jan 2013 (10 years approximate numbers)

    Below is the chart of Honeywell from Jan 2003 to Jan 2013 where the price range is 349 rupees in Jan 2003 and 2647 rupees in Jan 2013 that is coming roughly 8x.

    Now let's see Jan 2013 to Jan 2021 (8 years), here  the price range from 2017 in Jan 2013 to 40067 in Jan 2021 that is  coming roughly around 20x.

    So in 18 years of the data that is available for Honeywell Automation, it's share price has increased from 349 to 40067 in total that is massive 114x from its 2003  price.

    114x increase in share price has come when there was not too much focus on technology, automation, IoT, machine learning and other day to day problems we are facing in the world related with builindg, medical equipements, factories etc.

    Where the future lies for Honeywell Automation India Ltd.

    This Covid pendemic has changed everything in our life, the way we work, the way we visualise life, buildings, factories, the way we connect, the way to communicate. More and more importance is being given to the security, automation, advance medical equipments, safety equipments etc.

    Even if we remove this pendemic situation (as this is one of event in 100s of years) out of our calculations, the future lies in automation, machine learning, IoT, factory 4.0. World  is going into this direction where more and more work is being done by softwares, and automated systems rather than humans. World including India is going into Smart homes, smart communications, smart cities, smart analytics, smart connectivity, smart transporation directions and which companies know this better, its Honeywell as they have been doing this since decades now.

    So even if we invest in Honeywell today at 40000 ruppes (approximate price) a share and invest around 20 lacs (that will get us 50 shares) and instead of assuming its past performance result of 114x in 18 years, let's safer side assume only 50x in next 20 years that is coming wopping 100000000 (10 crores) by 2040.

    Assume any % of inflation in India in next 20 years, 10 crores corpus is more than enough for anyone to retire with and enjoy retirement life happily.

    L&T Technology Services Ltd.

    As per it's website L&T Technology Services Limited (LTTS) is a global leader in Engineering and R&D (ER&D) services. With 550 patents filed for 53 of the Global Top 100 ER&D spenders, LTTS lives and breathes engineering. Our innovations speak for themselves – World’s 1st Autonomous Welding Robot, Solar ‘Connectivity’ Drone, and the Smartest Campus in the World, to name a few.

    LTTS’ expertise in engineering design, product development, smart manufacturing, and digitalization touches every area of human lives - from the moment one wakes up till the time one goes to bed. With 52 Innovation and R&D design centers globally, we specialize in disruptive technology spaces such as 5G, Artificial Intelligence, Collaborative Robots, Digital Factory, and Autonomous Transport.

    LTTS is a young company and listed in 2016 only that is harldy 4 years however this company was in existence since last decade or so as Larsen & Toubro unilisted subsidiary company. It is leader in many promising sectors.

    Here is a snapshot from its Investor presentation.

    Made in India push, Larsen and Toubro as parent company (a proven, well managed company with solid and growth oriented management), Larsen & Toubro Infotech Ltd as sister company will keep its order book full apart from its own clients spread across the world.

    Lets see its past performance.

    Sep 2016 to Jan 2020, approximately 4 years 3 months it's price range is 876 rupees in Sep 2016 and 2456 rupees in Jan 2021 that is 2.8x in 4 years.

    Let's assume the same appreciation continues in LTTS in next 10 years, we can easily get 5x in 10 years and 20x (because of compounding effect) in 20 years (being modestly optimistic) though seeing its leadership position in all vertical they work on, my view is it can also can compound like Honeywell.

    Where the future lies for L&T Technology Services Ltd.

    LTTS caters to Transporation, Industrial Products, Telecom and Hi-tech, Plant Engineering and Medical devices apart from many other verticals where they are leaders. Seeing average customer stickiness of their top 30 clients more than 6 years, push towards automations, AI, ML, NLP, Factory 4.0 and many technology oriented push in coming decades; we feel this company is here to stay and compount the wealth in future.

    So even if we put 20 lacs at current price of 2500 (approximately) that gives around 800 shares. Assuming 20x in next 20 years, it comes 40000000 (4 crores) by 2040.

    Conclusion and Disclaimer

    Though in Share Market, nothing is sure shot, nothing is guaranteed however based on these companies background, their parent companies, their past peformance, their business potential; this seems to be a sure shot bet for retirements. 

    In any case, even if we are getting half of proejcted figure above (14 crores / 2) ie. 7 crores, its a decent amount to retire rich.

    Disclaimer: I am not SEBI registered and this is my projected analysis and for learning purpose only.

    Website disclaimer: The views, opinions, investment advices (if any) expressed by author on stocks.techfunda.com are their own and not that of the website or its management. Users are advised to contact certified financial advisor before making investment decisions.

    Submitted by PatientInvestor on Saturday, January 9, 2021

    Patience doesn't cost anything but pays a lot in stock market!

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