This is the 8th 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.
CCL has had a good quarter with 25% YoY growth in Sales despite the rise in coffee beans. It also saw continued high utilization at the Vietnam facility. The company’s branded business is growing well and has already reached Rs 100 Cr in sales in FY21. The company is doing well to capitalize on its unique offerings and is working hard on expanding its influence. This is evident from the response seen from customers for its new cold brew product and the inquiries it is getting from export destinations. It remains to be seen how fast the capacity expansion will be done for CCL and whether the branded business will be able to maintain its growth momentum. Nonetheless, given the enormous market opportunity for the branded business in the domestic market, CCL products may turn out to be a dark horse in the global coffee industry in the years to come.
The performance of the company was very encouraging in this quarter mainly on the back of sustained good performance of all core categories except fabric care and increasing rural penetration. The company has done well to revive the HI segment and push for market share gains in almost all categories. The company still faces the issue of slow recovery in the post-wash segment which used to be the company’s biggest earner. It remains to be seen how long will it take for the post-wash segment to revive and how the company will fare in the increasingly competitive environment in the health hygiene space. 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.
Marico has done well to maintain value and volume growth on a YoY basis in almost all categories and sustain growth momentum in domestic business. It is showing encouraging performance in the food category, especially in the health foods segment. The VAHO segment has seen a good recovery with a 200 bps market share gain. The company has seen a fall in margins due to input price pressures which are expected to moderate going forward. The company is also looking to focus on expanding rural reach by 25% p.a. for the next 2 years. The company’s focus on expanding into new health food categories under the Saffola brand and the in-demand hygiene looks shows good room for growth in these segments. It remains to be seen how long the COVID-19 situation lasts and what second-order effects it has on the company and general consumer behaviour. Nonetheless, given the company’s solid standing in its core categories, its expansion plans for high margin food categories, and its robust distribution network, Marico looks like a pivotal FMCG stock to watch out for.
PI saw another stellar performance in Q4 on the back of sustained sales momentum in both domestic and export markets despite the fall in EBITDA margin. The company is still evaluating options for acquisition. It is specifically looking for acquisition opportunities in the pharma sector to speed up expansion into this sector & where it can combine the acquired and its native technologies for newer opportunities. PI already has clarified that it is looking at options with domestic assets and significant export sales. It remains to be seen whether there are any other disruptions in-store from the expansion into the pharma space and whether the company will be able to match its medium-term guidance for growth in all segments. Nonetheless, given the company’s strong track record, strong tailwinds of the industry, a good agricultural season, and opportunities arising from the China substitution phenomenon, PI Industries remains a pivotal agrichemical sector stock to watch out for.
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