This is the 10th 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.
If you don’t want to miss these updates, please subscribe to our mailing list.
Please click on the read more button for more details on each stock.
The performance of the quarter was good with good growth in both sales and volumes. The demand for components is expected to rise significantly with the new PLI scheme coming into play. The management has outlined plans for capacity expansion in 2 new sites and for entering commercial air conditioning space with VRV & VRF. It remains to be seen how the industry demand will be affected by the current ongoing local lockdowns and whether the company will be able to achieve its optimistic expectations in the exports and components space. Nonetheless, given the massive opportunity size from import substitution, the growth prospects of the industry, and the company’s dominant position in the ODM market, Amber Enterprises remains a pivotal stock in the fast-rising air conditioning industry. However, the current valuation appears to be very stretched for the company.
Heidelberg Cement India
HCIL has had a great quarter with a rise in realization and margins, and volumes in Q4. The company has done well to maintain high margins and EBITDA/ton despite rising fuel and petcoke prices YoY. The company has also amassed enough clinker to cover for any business needs during the 2nd phase of the OLBC belt laying and plant shutdown. It remains to be seen whether the company will be able to match the competition which is operating in a much larger addressable market as compared to HCIL and what challenges it will face when expanding out of the Central Zone. Nonetheless, given the strong brand image of the company, the efficient utilization of its plants, and the pricing power it has, Heidelberg Cement India can prove to be a pivotal cement sector stock going forward.
Sudarshan has had a good Q4 with export demand rising robustly and domestic demand remaining resilient. It is also looking to complete the remainder of the multi-year growth capex of Rs 600 Cr in FY22. Sudarshan was also able to increase EBITDA margins despite a fall in gross margin due to RM inflation. This was mainly due to the rise of specialty products contribution. It has also seen a good response to products launched so far in FY21 and is planning additional launches in Q2 later in FY22. It remains to be seen whether the growth capex will deliver to its expectations in the given time frame and how long will it take for the company to reach its goal of cracking the global top 3 in the pigment industry. Nonetheless, given the company a strong position in both domestic and export markets and its steadily improving margins due to an improving product portfolio, Sudarshan Chemicals is a pivotal chemical sector stock to watch out for.
VGL has had another blockbuster quarter with revenue growth of 34% & profit growth of 40% in Q4. It has also seen its unique user base expand 38% YoY to 5.01 lacs. The company has also launched a new channel TJC Beauty which is already profitable and has established its German subsidiary. It is expecting this new geography to break even in 3 years. It remains to be seen how long the company will be able to maintain its current growth pace and match up to its other TV sellers rivals like QVC and JTV, and whether the venture into the new country become fruitful as per management expectations. 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 stock to watch out for.
If you don’t want to miss these updates, please subscribe to our email list.
And don’t hesitate to reach out to us if you have any questions.