This is the eighth 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.
Jyothy Labs is a consistent performer in the FMCG segment in India. They have successfully carved out a niche for themselves and have established themselves as market leaders in the fabric care and dishwashing segment. The performance of the company was dismal in this quarter due to industry disruption and the lockdown. The company has done well to be able to come back fast and resume production much faster than many of its peers. It has also showcased its R&D capability by launching Margo hand sanitizer in just 21 days. The company still faces the big issue of an impending decline in the post-wash segment which is the company’s biggest earner. It remains to be seen how the company will fare in the tough economic environment ahead and whether it will be able to capitalize on the renewed focus on health and hygiene through its product offerings. Nonetheless, given the renewed focus on health and hygiene going forward and the company’s good distribution reach and resilient product portfolio, Jyothy Labs may turn out to be a pivotal FMCG stock to watch out for.
PI Industries have been one of the most consistent performers in the agrichemicals business. FY20 was very good for the company with robust growth in export businesses. The company is now expanding into adjacent segments and has already gotten into pharma intermediate space. The overall favourable outlook for agriculture and monsoons going forward bodes well for the company. 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. Although the management plans for QIP to finance the capacity expansion for the company has been delayed due to COVID-19 disruptions and economic uncertainties, they remain confident of raising the capital required. It remains to be seen whether there are any other disruptions in store from COVID-19 or whether the company will be able to go forward with its QIP as easily as the management anticipates. Nonetheless, given the company’s strong track record, strong tailwinds of the industry, expectations of a good agricultural season and opportunities arising from the China substitution phenomenon, PI Industries remains a pivotal agrichemical sector stock to watch out for, particularly given the share resilient performance since the market crash in March.
Ultratech Cement Ltd
Ultratech Cement is the biggest cement maker in India. The company has done well to acquire aging cement makers in India and integrating them and adding on to the company’s ever-growing market presence and reach in the country. Despite fall in volumes in Q4, the company was able to keep efficiency high and achieve its highest ever EBITDA/ton figure. The company is doing well to focus on cash conservation and cost reduction after the disruption caused by COVID-19. It remains to be seen how long will it take for demand to normalize for the industry and when will demand come back in the principal market of West India where demand has fallen the most. 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.
Vaibhav Global has established itself as an influential player in the jewellery exporting and telecommerce business. They have consistently delivered good revenue growth in recent years and continue to grow their business through new selling mechanisms and product offerings. The company has done well to pivot fast to selling essential goods in the current disruptive times due to COVID-19 where a clear demand for such products has risen in the market. It has also helped the company enhance and expand its customer engagement to a more varied customer base than its traditional jewellery customer set. The company is also looking into innovative means like influencer promotion programs and expanding smaller ticket jewellery items of faith like crosses and rosaries which may prove instrumental in current times where high ticket and discretionary purchases like handbags may go down. It remains to be seen whether the company will be able to maintain its current growth pace and match up to its other TV seller rivals like QVC and JTV, all of which have an established customer base and earn way higher per household than the company. Nonetheless, given the company’s prudent and efficient cost management, its resilient supply chain, and its agility to introduce new products fast depending on changing situations, Vaibhav Global seems to be an interesting jewellery sector to watch out for.
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