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This is the 11th post in our quarterly result update series for Q4FY21.

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.

 

Cupid Limited

The company has had a down quarter with revenue fall of 2% YoY and PAT decline of 40% YoY. The company seems to be well placed with a strong order book ensuring revenues of more than Rs 113 Cr which doesn’t include the projected sales of Rs 40-50 Cr from medical devices. It is seeing renewed demand for male condoms and has also been able to improve the margin on this segment to 22%. The company is looking to expand in the medical testing space and is expecting sales of Rs 40-50 Cr in FY22 & Rs 100 Cr in FY23. It remains to be seen how the COVID-19 situation pans out for Cupid in South Africa, given it is a major market for both condom sales and HIV testing kits, and what challenges the company faces in its foray into the medical devices field in the domestic space where there are already 7-8 competitors. Nonetheless, given the company’s long history of expertise in this field and the consistent sales growth and expanding order book, Cupid is a good small-cap stock to watch for.

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Divi’s Laboratories

Divi’s had another good quarter in Q4 and maintained its growth momentum in FY21 with 26% revenue growth and 44% PAT growth. The management is doing well to develop new avenues like contrast media APIs and overall efficiency through initiatives like green chemistry. It has also completed the majority of its expansion in capacities for generic APIs and nutra segment which should start contributing to sales in a few months. It remains to be seen how the company will be able to chart its path in the future by solely relying on its core areas of API and Custom Synthesis while everyone else is diversifying into as many emerging segments as they can and whether the rise in margins in FY21 can be sustained going forward. Nonetheless, given the company’s history of excellent performance and its standing in the global API industry, Divi’s Laboratories remain a pivotal pharma stock in India, especially given the massive China substitution opportunity.

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Hester Biosciences

Hester had a good Q4 with profits doubling YoY despite the absence of the domestic animal vaccine tender business & FAO tenders from Nepal. The company has made good inroads in the animal health products space and the poultry business remains resilient. The company has also entered an MoU with Bharat Biotech to make its drug substance which should yield 50 lacs to 1.5 Cr doses per month from August onwards. It is also looking forward to the start of production in Hester Africa in Sep. It remains to be seen how long the slowdown in animal vaccine tenders in India & from FAO continues and how long it will take for the company’s novel vaccine in partnership with IIT Guwahati to be completed. Nonetheless, given its excellent technical expertise and the future potential of its international operations, and its upcoming foray into animal health products, Hester Biosciences remains a good small-cap stock to watch out for.

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Wonderla Holidays

The Quarter saw a decent recovery for Wonderla mainly due to all three parks opening in Jan. But operations in FY22 have again stalled due to park shutdown in the 2nd wave of COVID. In the meantime, the company continues to focus its downtime on strategizing on how to enhance customer experience and to increase non-ticket revenue. It has also put the Chennai expansion plans on hold and is focusing solely on improving existing park operations to their previous levels. Although its parks are shut down currently, the company is looking at other opportunities like in Odisha, Gujarat & Sri Lanka to stay ready to expand once the opportunity arrives. It remains to be seen how much time it will take for normalcy to come back in their business especially since it has gotten shut down again due to the 2nd wave of COVID-19. However, Wonderla has the resilience of the balance sheet to survive through these tough times and the potential to positively surprise once all the parks are opened and the footfall comes to pre-COVID level.

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