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This is the first post in our quarterly update series for Q2 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.

Bajaj Auto Ltd

Bajaj Auto has been a long performing player in the automobile sector that has established itself as a dominant player in all the segments that it operates in both in India and abroad. They have suffered a dismal quarter with a big decline in their dominant segment of domestic motorcycles. The company has guided that they will get rid of their BS-IV stock and build up their BS-VI stock. The company is waiting on the performance of the festive season and the rest of the Q3 to gauge whether the industry slowdown has bottomed out or not. They will proceed with their new launch plans based on their review of festive season performance. The upcoming launch of the e-scooter is expected to be big for the company and provide it access to an in-demand but largely unorganized sector. Nonetheless, despite the dismal industry conditions, Bajaj Auto continues to stay resilient and has emerged as a bellwether stock in the volatile auto industry today.

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CCL Products Ltd

CCL has already established itself in the wholesale coffee space for many years and their foray into branded sales through Continental Coffee label has been very encouraging. The company has had a couple of lean quarters. The company, however, has seen encouraging signs on its foray into the USA market. The company has been proactive in wanting to grasp this opportunity which is evident from its decision to extend credit to customers in the USA. The performance of the retail segment has been encouraging but it remains to be seen whether this segment shall perform as highly as expected in the next 2 quarters. Nonetheless, despite slow growth in the current quarter, CCL remains a good investment prospect in the coffee industry given their experience and their new product portfolio which is expected to be well received in the market.

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PI Industries Ltd

PI Industries have been one of the most consistent performers in the agrichemicals business. The domestic performance of the company continued its decline while exports boomed to provide good overall performance for the quarter. The company also managed to sequentially improve EBITDA margins by more than 200 bps. The company has been on a steady growth path and it seems like they will comfortably achieve their growth guidance of more than 20% for the year. The erratic monsoon may have caused a decline in the domestic agro market but it has raised reservoir levels which bodes well for the upcoming Rabi crop season. Thus PI industries look like a good investment prospect in the specialty chemicals industry, given their consistent export growth and the expectations of a good rabi crop season. However, the valuation at current levels seems to have priced in almost all the near term positives.

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Sterlite Technologies Ltd

Sterlite Technologies has been able to continue its revenue expansion in the current quarter. But the margin profile for the company has fallen YoY, largely due to the increase in the services business and its contribution to total revenues. The company has guided that they expect the volumes to stay flat this year and this should prove to be a dampener for the company. The management has expressed that the company’s growth in the rest of the year is to be driven by the services businesses. It remains to be seen whether the company will be able to expand its services business at the pace that they are projecting. Nonetheless, given the company’s expertise and industry position and the enormous opportunity for the company in the upcoming 5G transition, Sterlite Technologies remains an investment prospect to keep an eye out for.  Valuation has come down drastically in the last year due to various reasons. It would be interesting to see how it fares in the next couple of quarters in terms of revenue mix, margin profile and ROE.

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