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This is the 2nd 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.

Aavas Financiers

Aavas Financiers is a fast-growing housing finance company in India. What sets it apart from the large housing finance players like HDFC, LIC Housing Finance & Repco is the space they cater to. The average ticket size of loans is less than 9 lacs against more than 14 lacs for others. Aavas caters to smaller towns where the population is less than 10 lacs. Aavas has done well in Q3 with 30% YoY revenue growth and 25% profit growth. It has also maintained AUM growth of >20% despite the pandemic and is back to collections above 98%.  Given the positive cues from the real estate sector in recent times, Aavas could be a big beneficiary going forward. However, stretched valuations may have factored in most of the positives. Nevertheless, it is a good business to track in the housing finance space.

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Bajaj Auto

Bajaj Auto has seen a phenomenal quarter with its highest ever revenues, export volumes and export revenues in Q3. The company has seen good momentum continue in Pulsar 125 which has managed to capture 23% market share despite being the most expensive bike in the category, all within 6+ months of launch. The recovery of the 3 wheeler segment on the other hand continues to be slow but Bajaj is confident of capturing the recovery momentum when it comes. It remains to be seen whether the recent rise in demand is sustainable and how will the RM costs fare out in the near future. Nonetheless, given the company’s position in export markets and its strong presence in all market segments in the two-wheeler market and three-wheeler markets, Bajaj Auto remains a pivotal auto sector stock to watch out for.

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Indian Energy Exchange

Indian Energy Exchange has seen a good quarter with its highest ever volumes traded on the platform and sales & profit growth of 39% YoY. It has also gotten approval for IGX and has already gotten strategic partners like Adani Total Gas and Torrent Gas to invest 5% each in it. IEX is also seeing increased participation from discoms in the exchange given the flexibility and competitive pricing as compared to bilateral contracts. It remains to be seen how the policies and regulations will evolve in the power sector and how the issues capping the gas sector in India will be resolved in the future. It is still very early days in the power exchange market. However, as of date, IEX looks like a pivotal player in this industry.

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Ultratech Cement Ltd

Ultratech has had a phenomenal quarter with sales growth of 19% and profit growth exceeding 100% YoY. The company is doing well to focus on cash conservation and cost reduction while maintaining its steady pace of debt repayment. It has also been restarting all the projects postponed by COVID and expects the Century brand transition to be completed in the next 2 quarters. It remains to be seen how long will uptick for infra and urban real estate will last and whether there is something in store for the infra and real estate sector in the upcoming Union Budget. Nonetheless, given the company’s leadership position in the industry, its wide distribution network across India, and its strong brand image, Ultratech Cement remains a pivotal cement sector stock for all Indian investors.

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