This is the 10th post in our quarterly result update series for Q1FY21.
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.
BSE is the largest stock exchange in the world in terms of listed entities. The company has been in this industry sector for close to 150 years and are still at the forefront of the industry in terms of technology and access to tradable products. The company is doing well to maintain its strength in the equity and commodity derivatives space and continue the growth momentum of BSE Star. Along with the BSE Star MF and international exchange business, the company has launched another platform in a JV with Ebix for insurance to add another future engine for growth. The company faces tough competition from other rivals especially NSE in the emerging segments like BSE Star which has forced them to reduce charges for the platform. It remains to be seen how the company will be able to fend off the competition and handle the trio of new growth businesses going forward. Nonetheless, given the company’s long-standing brand value and its market execution experience and the potential of its new businesses, BSE can turn out to be a dark horse wealth creator in the next few years.
Dixon Technologies (India) Ltd
Dixon Technologies is one of the foremost leaders in the electronics manufacturing and outsourcing industry in India. The company has done well to scale up its different diverse divisions: lights, consumer appliances, mobiles, etc. It has also acquired many marquee customers along the way. The current quarter was dismal for the company mainly due to production shutdown during the lockdown. Demand is expected to come back fast in all of its segments and the company is also hopeful of expansion in mobiles on the back of the PLI scheme and LED exports. The company has also successfully installed 7 fully automated production lines in Lighting in Noida plant which should margin appreciation in the future. It remains to be seen whether the company will qualify in its application for the PLI scheme and what obstacles it will face that may threaten to halt its growth momentum. Nonetheless, given the list of marquee customers that the company has gained and retained over the years and its continuous efforts to expand existing capacities like consumer electronics and adding new product lines like disruptive medical devices, Dixon Technologies is cementing its place as a good growth-story in the outsourced manufacturing sector in India.
Minda Industries has been one of the top auto ancillaries providers in the country. They have steadily expanded their product offerings such that their kit value is increasing year on year with the addition of newer products in the mix. The company has had a dismal quarter which was mostly due to plant shutdown during lockdown and production is expected to revive soon. Their foray into alloy wheels is expected to deliver good growth for the company in the future particularly considering the import substitution opportunity but the opportunity seems to be delayed due to COVID-19 along with the company’s sensor project. The company has also managed to gain good orders for its Lighting business through its acquisition of DELVIS. It remains to be seen how long this auto sector slowdown shall continue or whether recovery will be as fast as the management expects. Nonetheless, given the new orders that the company has bagged, their improving product portfolio and massive import substitution opportunity, Minda remains a compelling auto ancillary stock to watch out for.
PI Industries have been one of the most consistent performers in the agrichemicals business. The company saw a phenomenal performance in Q1 on the back of normal monsoons and the addition of Isagro. The China substitution phenomenon should provide the company with opportunities in both its native agrichemicals and the new adjacent space that it is looking to expand into. The company was able to successfully raise Rs 2000 Cr through QIP. It will be used to finance its expansion into adjacent segments and into expanding operations beyond India. It remains to be seen whether there are any other disruptions in-store from COVID-19 or whether the company will be able to match its lofty guidance for growth in all segments. Nonetheless, given the company’s strong track record, strong tailwinds of the industry, a good agricultural season, and opportunities arising from the China substitution phenomenon, PI Industries remains a pivotal agrichemical sector stock to watch out for.
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