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This is the 1st post in our quarterly result update series for Q3FY21.

In this post, we’re sharing the latest updates of the stocks from our watchlist. Please don’t treat this as a buy recommendation. We find these businesses interesting and we may build position (or buy more of those that are already in our portfolio) in them in the future. The purpose of this post is to bring clarity to our understanding of the businesses we are tracking.  We make our notes on the quarterly results and conference calls. Putting it up here makes it easier for us to refer them at a future date.

You can see the earlier updates here.

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Please click on the read more button for more details on each stock.

HDFC AMC

HDFC AMC is the leading mutual fund house in India. It is the market leader in actively managed equity funds space and a trusted mutual fund provider for individual investors which is evident in its high individual account numbers and AUM. The company had a muted quarter due to the continuing fall in Equity AUM and overall outflows for the MF industry. The company has done well to focus on cost savings and new product launches and was able to launch the HDFC Dividend Yield Fund with good reception and collections of Rs 1500 Cr. The management has admitted that some of the equity funds had fallen behind the benchmark but they have assured that the recovery in these funds has already started. It remains to be seen how the economic situation post-COVID-19 will unravel and how it will continue to affect the investment sentiments in India. However, given the company’s strong past track record and its leadership position in the industry, the medium and long-term outlook for HDFC AMC remains intact.

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HDFC Bank

HDFC Bank is the biggest bank in the country by market capitalization. It has deservedly earned its stellar reputation over the years. The bank has performed well in Q3FY21 with almost 30% growth in CASA. The bank has been able to successfully capitalize on the festive season which was evident from the QoQ increase in card accounts. The bank has also launched Video KYC for personal loans and will look to expand this into other segments which should help enhance customer experience and reduce costs and improve efficiency. It remains to be seen how the post-COVID-19 recovery will pan out in the near future and whether there are any surprises in store from COVID-19 still. Nonetheless, given the bank’s resilient customer set, strong liquidity profile, and enduring brand image, HDFC Bank remains an indispensable banking stock for every investor, more so because of the recent correction in valuation.

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Sterlite Technologies

Sterlite has had a good quarter and it has witnessed the highest ever cable sales volumes. However, high-profit growth YoY in this quarter is mainly due to the lower profit base last year. In Q3FY20, they had a high exceptional loss of 50 Cr. That is not there this quarter, hence, profit optically looks higher. They are seeing a good recovery in the product business with utilization levels at an all-time high. The company is seeing a good deal-wins abroad mainly in its products in Q3 and is also expecting to see sales for virtualized access products start from next year onwards. There is a massive opportunity in the cards for the company from the development of the 5G ecosystem announced by Reliance Jio based on Open RAN technology which is also supported by Airtel, both of which have announced that they will connect more than 100 million homes in next 5 years. It remains to be seen how the post-COVID-19 unravels and how fast will the move towards 5G take place in the company’s principal geographies. Nonetheless, given the company’s capabilities in providing integrated and tailored network solutions, its expanded production capacity, and long-running order, Sterlite Technologies looks like a pivotal stock to watch out for in the communications technology space.

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Tata Elxsi

Tata Elxsi had a good quarter with its highest ever quarterly revenues and robust PBT & PAT growth.   The company continues to see good growth in the emerging medical space and the media & communications space which have been the primary driver of growth in Q3. It has also managed to improve its offshore ratio and maintain high levels of utilization which has helped boost PBT growth. The auto segment continues to be subdued due to the COVID-19 situation but is recovering well. The company has done well to bring in a North American EV player as a customer in Q3. It remains to be seen how the company’s major clients adapt to the new world transformed after COVID-19 and what impact it shall have on the company’s performance going forward. Nonetheless, given the company’s strong technological capabilities and its resilient performance in the last year, Tata Elxsi remains a good technology stock to watch out for, particularly given the rising demand for its services in the broadband and media & communications spaces.

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