This is the 9th 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.
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Please click on the read more button for more details on each stock.
EML continued its impressive industry outperformance in both the RE and VECV businesses and once again achieved its highest ever quarterly revenue from operations. The company has seen a good response to the MiY platform and the Meteor which has seen overwhelmingly good response. The demand for the Meteor is so high that the company has even decided to increase its monthly capacity to 15000 units from 8-10k units currently. The next big focus for RE is international expansion. The company still faces major challenges plaguing the industry like RM cost inflation and the electronic components shortage, but the management assures that these issues are dealt with by the company either by reducing the consumption of critical RM or by stocking enough chips. It remains to be seen how long the company will be able to keep outperforming the industry and how international expansion plans pan out in the future. Nonetheless, given its resilient performance in its various segments and the strong brand and industry position of the company, Eicher Motors remains a critical stock to watch out for every auto sector investor.
ITC has seen good performance in the current quarter with the Agribusiness growing 78% YoY on the back of wheat exports and the FMCG-Others doing very well and rising steadily. The company is doing well in maintaining a leadership position in many of its brands and always introducing new products under these brands. The company has shown resilient growth in its FMCG segment in the health & hygiene space which was witnessed by the more than Rs 1200 Cr consumer spend on Savlon alone in FY21. It has also done well to keep expanding the Aashirwad range and maintain market share in strong areas like atta while expanding into pulses, breakfast meals, and most recently dairy products. The Hotel business is also on its way back with demand coming in from weddings and staycations and has earned Rs 25 Cr EBITDA in Q4. It remains to be seen how the company will mitigate the effects of the systematic decline of the cigarette industry and how long will it take for the Hotel business to get back to pre-covid level of operations. Nonetheless, given its history of building and maintaining durable brands, its leadership in various operating segments, and its mammoth cash-generating ability & the 5%, ITC remains a critical stock to watch for any investor interested in the themes of FMCG and consumption, all the while providing a consistent 5% dividend with a strong runway for business for many years to come.
Thomas Cook India
The management for TCL is doing well to use this period of slow operations to focus internally and improve the cost structure which has resulted in them already achieving 122% of its cost-savings target for FY21. The company has taken encouraging actions for DEI like winning various commitments for large tourist attractions in the Middle East and expanding in MICE and Corporate Travel. It is also continuing to bring back its other businesses to normal levels and has been constantly innovating and adding new services like automated travel booking for corporate clients & launching the first digital tool in FX services in India. It remains to be seen how long it will take for things to normalize for the travel industry and how consumer behaviour will evolve from COVID-19. Nonetheless, given the company’s resilient balance sheet and the management’s focus on improving the internals of the company and focusing on new avenues for the industry, Thomas Cook seems to be a resilient travel industry stock in an industry plagued with shutdowns and bankruptcies these days.
The company continued to see good sequential recovery in Q4 but Q1 was again hit hard with the 2nd wave of COVID-19. As per the management, it will take at least FY23 for the company and industry to come back to normalization. It remains to be seen how VIP continues to strengthen its internals in the meantime and develop the ecommerce channel which was small for them so far. Given the slowdown in travel and travel activities at the moment, demand-revival seems a distance away. Nonetheless, given the company’s strong brand image and leadership position in the industry along with the resilient balance sheet of the company, VIP industries remains a pivotal mid-cap stock to watch out for.
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