This is the first post in our quarterly update series for Q4 FY20.
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.
CRISIL has been a trusted financial service and information provider for a long time. They have established themselves as a reputed name in their operational fields of ratings, research and advisory. The company saw a good response to the rating business while the research business grew steadily with the addition of Greenwich Associates to the company’s umbrella. The advisory business suffered a lot due to delays in contract closures from COVID-19. The company has guided that the oncoming period will be tough for both the Indian and World economy. It remains to be seen what second-order effects the COVID-19 situation will have on the company’s performance going forward. Nonetheless, given the company’s industry position and its financial resilience, CRISIL remains a pivotal stock in the rating sphere. The valuation multiple of the company continues to be near the lowest level in the last ten years which makes it an attractive potential investment for the long term.
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 very well in the last quarter of FY20 with more than 21% growth in Balance Sheet and advances. It is a testament to the bank’s brand image that deposit growth has outpaced advances growth considering the size and reach of the bank.
The management has assured that the bank has adapted to the new normal due to the COVID-19 disruption and that its balance sheet and customer set are resilient enough to weather the uncertainty ahead. It remains to be seen how the whole COVID-19 scenario pans out and how it changes the world and especially the banking industry going forward. 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.
HDFC Life Insurance
HDFC Life is one of the front runners in the life insurance industry in India. The company has gone from strength to strength and maintained a good balance of new business and existing business while consistently growing over the years. The company has seen a big fall in investment income due to the fall in the investment portfolio from the fall in Indian equity markets. The company has undergone rigorous stress testing to ensure that even in these tough conditions, the company is able to deliver. It remains to be seen whether the situation ahead unfolds within the company’s expectations or whether we may see more uncertainty arising from COVID-19. Nonetheless, given the company’s market positioning, its dynamic product portfolio, and its emphasis on the development of non-traditional channels, HDFC Life remains a pivotal insurance stock in the country.
The company had a good quarter with good sequential growth and expansion in all operating sectors. The management expects the current growth momentum to persist and cover for the decline in the past 2 quarters and maintain flat growth for FY20. The company has seen good growth in the emerging medical space and is seeing good signs of growth revival from the auto sector. It remains to be seen whether this expected auto sector revival remains sustained and whether the company will be able to grow its medical space business at the pace that it is expecting. But given the company’s expertise in disruptive technologies like autonomous cars and product engineering in diverse sectors like OTT and medical devices, Tata Elxsi remains a potentially good stock to watch out for.
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