Big movers stocks

Like Neil Armstrong, the first person to set foot on the Moon, there are several companies in the listed universe of Dalal Street, which enjoy the first mover advantage.

Investing in stocks of first mover companies or market pioneers in any segment can be a good strategy to make a windfall in the market.

Take this! Shares of Eicher Motors, which enjoy a competitive advantage with its Bullet range of motorbikes, have surged over 7, 721 per cent in last 10 years. The return could translate an investment of Rs 10, 000 into to Rs 7.82 lakh during this period. This is not the only stock that enjoys competitive advantage.

Market experts say zeroing in on companies that enjoy first mover’s advantage is certainly a good strategy, but one has to see if the product has entry barriers to keep the competition at bay.

Another aspect one has to look at is the size of the addressable market in which the product has been launched and which is significantly big to move the needle for the company.

On the other hand, “any replacement option available may spoil the party soon. Hence one also has to see if there are many replacement options. A good customer perception is also a must for the product to continue holding good market share, ” said Shrikant Akolkar, Senior Equity Research Analyst, Angel Broking.

Siddharth Sedani, Vice-President, Equity Advisory Anand Rathi Financial Services, said: “Business of the first-mover company gains competitive advantage and enables it to establish strong brand recognition and customer loyalty. First-mover companies have an advantage in controlling resources, such as a strategic location or an exclusive contract with key suppliers. First movers are also called market pioneers.”

For a layman, the first-mover’s advantage is when a company is the first entrant in a particular market segment. The launched product is absent in the market and hence company can hold a high degree of competitive advantage. In absence of the competition, the first entrant gets a huge market share and can reap profits until competition increases.

Market experts are bullish on Eicher Motors, Natco Pharma, Equitas Holdings, SH Kelkar and Apar Industries in this niche space.

Natco Pharma has a first mover’s advantage in its domestic business. It is the first company in India to launch some products in its oncology and Hepatitis C product portfolio. “The products are complex to make and have limited competition hence the benefits are likely to continue for some time, ” said Akolkar.

Shares of Natco Pharma have soared 2, 511 per cent to Rs 781.45 till February 20, 2017 from Rs 29.93 on February 20, 2007.

The primary market, too, gave a red carpet welcome to SH Kelkar as it got first-mover advantage in the listed space. The scrip in November 2015 listed at 23.33 per cent the issue price of Rs 180, following a successful initial public offering (IPO), which saw a subscription of 27 times. The scrip was trading at Rs 307.70 on February 20.

SH Kelkar enjoys first mover advantage in the niche segment and aims to focus on retaining current domestic market leadership and enhancing market share in fragrance and flavour industry in India and emerging markets.

Sedani of Anand Rathi Financial Services said, “We continue to remain positive on the company over medium and long term and maintain our ‘buy’ rating on the stock with a target price of Rs 382 per share.”

Equitas Holdings was the first small finance bank (SFB) to hit the public markets. It has the first-mover advantage, with impressive growth record and diversified portfolio.

Equitas is strongly positioned to grow on the back of its balanced portfolio. The market segment which the upcoming bank intends to cater to has vast untapped business potential and exploiting it effectively will drive the company’s growth for multiple years.

“We expect Equitas to attract meaningful valuation premium due sustainability of high growth in its diversified business and lower liquidity risk as it converts into a bank. We, therefore, continue to remain positive on the stock with ‘buy’ rating and target price of Rs 265, ” said Sedani. Shares of the company were trading at Rs 180.15 on February 20.

On Eicher Motors, Akolkar said, “The firm is the first one to make this range of bikes and much ahead of the competition. This is driving a strong growth in its business.”

Apar Industries is engaged in the business of manufacture of conductors, transformer/specialty oils and power/telecom cables. According to Nirmal Bang Securities, Apar Industries is the key beneficiary of strong transmission capex and enjoys first-mover advantage as well as market leadership in highly specialised products.

It is the largest manufacturer and exporter of conductors in India. The company has 23 per cent domestic market share and health exports with 46 per cent of order book.

“Better revenue mix with rising share of HEC conductors to drive margins. We expect 35 per cent earnings CAGR over FY16-FY19E. Return on capital employed of the company to rise from 26 per cent in FY16 to 35 per cent in FY19E. Share price of the company can touch Rs 845.” The scrip was trading at Rs 735.20 on February 20.

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