Top 3 Monopoly Stocks Poised for Long Term Growth in India

In the dynamic world of investing, finding under-the-radar stocks with monopolistic advantages can be a game-changer. These companies often have significant market shares, robust pricing power, and consistent profitability. This blog highlights three such companies: MapmyIndia, DreamFolks Services Ltd, and ZF Commercial Vehicle Control System India. Each of these firms has carved out a dominant position in their respective industries, making them attractive candidates for long-term investment.

MapmyIndia: Navigating the Future

Advanced Mapping and Data Products

MapmyIndia specializes in creating advanced maps that represent the real world in both 2D and 3D formats. These maps are continuously updated in near real-time to reflect place updates, location-based events, safety alerts, changes in road conditions, live traffic, and weather. This cutting-edge technology has been extended beyond India to countries like Sri Lanka, Bangladesh, Nepal, Bhutan, Myanmar, UAE, and Egypt.

Financial Performance and Growth

From 2020 to 2024, MapmyIndia’s sales increased at a 5-year compounded annual growth rate (CAGR) of 23%, while net profits surged by 46%. The company's return on equity (RoE) and return on capital employed (RoCE) averaged 20.8% and 19.4%, respectively. Total revenue from operations grew by 35% year-over-year (YoY), with consumer tech and enterprise digital transformation revenue up 49% YoY to Rs 1.9 billion, and automotive and mobility tech revenue up 23% to Rs 1.8 billion. In FY24, map and data revenue rose by 23% to Rs 1.4 billion, while platform and IoT revenue surged by 42% to Rs 2.4 billion. Net income grew by 23% YoY, with cash and cash equivalents reaching Rs 5.5 billion by FY24-end. The company’s open order book and annual new order bookings increased significantly, up 63% to Rs 8.3 billion in FY24.

Future Prospects

With a focus on IoT-led business, MapmyIndia aims to surpass Rs 10 billion in revenue by FY27-28. Currently trading at a PE of 97.5x, a premium versus the five-year median PE of 70.1x, the company reflects strong optimism for future growth and profitability.

DreamFolks Services Ltd: Enhancing Airport Experiences

Market Leader in Airport Services

DreamFolks Services Ltd is India’s largest airport service aggregator platform, enhancing passengers’ airport experiences through a technology-driven platform. The company holds a 95% market share in the airport lounge business, providing access to lounges, food and beverage, spa and wellness, meet and assist services, airport transfers, transit hotels, nap rooms, golf games, visa services, and E-sim.

Financial Performance and Growth

DreamFolks has experienced substantial growth from 2020 to 2024, with sales increasing at a 5-year CAGR of 36% and net profits rising by 35%. The company’s RoE and RoCE averaged 37% and 46.4%, respectively. In FY24, the company achieved revenue of Rs 11.3 billion, recording a strong growth of 47%, while facilitating approximately 11 million passengers. The adoption of digital tools like web-access and self-check-in kiosks contributed to 10% of monthly passengers. The railway lounge business grew robustly by 3.5x in FY24. Services other than Indian airport lounges contributed 6% of the total revenue in FY24 and are expected to reach 15-20% in the next 4-5 years.

Future Prospects

DreamFolks expects revenue to grow at a 20% CAGR over the next three years, focusing on expanding its service portfolio, diversifying its client base, and expanding geographically. The company aims to maintain gross margins in the range of 11-13%. Currently trading at a PE of 37x, a discount versus the five-year median PE of 39.2x, DreamFolks shows strong potential for sustained growth.

ZF Commercial Vehicle Control System India: Leading in Braking Systems

Market Leader in Braking Systems

ZF Commercial Vehicle Control System India is the market leader in advanced braking systems, conventional braking products, and related air-assisted technologies and systems. With a strong customer base including TATA, Ashok Leyland, and Audi, the company holds an 85% market share in its industry. ZF provides products and services to segments such as trucks, buses, off-highway, defense, cars, and fleets.

Financial Performance and Growth

From 2020 to 2024, ZF’s sales increased at a 5-year CAGR of 6%, and net profits rose by 9%. The company’s RoE and RoCE averaged 10% and 13.2%, respectively. Revenue and net income grew by 10% YoY and 27.4% YoY in FY24, driven by growth in the commercial vehicle industry. The company outperformed market growth in its OE sales and observed growth in aftermarket sales due to new products and digital solutions. However, exports experienced degrowth due to inventory reductions and shipment delays.

Future Prospects

The management maintains a positive outlook towards exports due to increasing order books and new projects. Currently trading at a PE of 73.5x, a discount to its five-year median PE of 82.5x, ZF is well-positioned for future growth despite recent challenges.

In Conclusion, Investing in India’s monopoly stocks presents a unique opportunity due to their strong pricing power, high market share, and stable profitability. However, potential risks include regulatory changes, technological disruptions, and shifts in consumer preferences. Regulatory risks are particularly pertinent as governments may intervene to foster competition and protect consumer interests. Public and political scrutiny can also impact stock prices, highlighting the importance of evaluating these factors alongside financial stability and market position. Additionally, ethical considerations and corporate practices may influence public perception and regulatory scrutiny, potentially affecting stock performance. Investors are advised to conduct thorough research and consider these factors carefully before making investment decisions in monopoly stocks.