This is the third post in our quarterly update series for Q1 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 in 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.
Credit Access Grameen has emerged as one of the most reliable and fast-growing microlenders in the country. The JLG model has helped bring communities of borrowers together and helped reduce overall risk from their lending to a very large extent as seen in their low NPA numbers. The company is still to expand into many states in the country and thus it is fair to say that the opportunity size for them is growing bigger as they move forward. The company has yet to face any problems from the liquidity slowdown in the NBFC sector and continues to enjoy the support of borrowers and lenders alike. It remains to be seen what unique challenges they will face as they expand to new states. The valuation at current levels is a little too stretched, so waiting for correction seems prudent. Nonetheless, Credit Access Grameen is still a good stock to watch out for.
Hester Biosciences has been one of the most consistent small-cap stocks in the past few years. The company has experienced a small blip in their growth path in the current quarter mainly due to rising feed prices for poultry. But the growth of their non-poultry divisions has been very encouraging and the push from the Indian government for domestic animal immunization should spur the growth of these small divisions in the future. The company is still over-dependent on the poultry business and any protracted slowdown in this sector will be harmful to the company. It remains to be seen how fast they can grow their animal healthcare division to combat the cyclical nature of the poultry business. However, given the past performance of the company and their good quality products and maintenance of margins, Hester Biosciences is a good stock to watch out for.
Jyothy Labs is a consistent performer in the FMCG segment in India. They have successfully carved out a niche for themselves and have established themselves as market leaders in the fabric care and dishwashing segment. The company has significant room to grow in these segments due to the presence of their power brands and the expansion into newer states for their lesser brands. The company is gearing for new product launches for Margo and Exo which will be significant for the company in the near future. It remains to be seen whether their new brands will be as well-received or not. Further, we also need to watch out whether the declining household insecticides industry will continue to bring down revenues for the company in this segment. Nonetheless, Jyothy Labs remains an interesting FMCG stock which is still not as high priced as other FMCG majors in the market thus representing a value proposition for any investor looking into the theme of consumption.
PI Industries have been one of the most consistent performers in the agrichemicals business. They have performed reasonably well despite the slowdown in domestic business from the delayed monsoons due to export growth of the company. The company is on schedule for their massive CAPEX plans and intends to continue this yearly schedule even in FY21. Furthermore, they have indicated that they are willing to increase their CAPEX from current should the need arise or undertake any new acquisitions should such an opportunity arise. The company’s stance as such is very aggressive and it remains to be seen whether they will be able to achieve their guidance as smoothly as they have in the recent past. Nonetheless, given the company’s stellar record, their expansion into new markets for existing products and their robust future product pipeline, PI industries deserves a good look for any investor interested in investing in Agrichemicals.
Piramal Enterprises has been one of the premier conglomerates in the country. They have built a robust and rigorous financial services business while slowly growing and building their pharma and health analytics businesses. The company has suffered from the slowdown in the NBFC space but despite the current environment, they have provided steady revenue and profit growth. The company has also been at the forefront of all their engagements and have pacified investors calmly to seek clarification whenever any rumor about the company surfaces. The management has acknowledged that the current tough environment is likely to persist and thus have refrained from providing any revenue growth guidance as their primary focus in this tough period is to maintain liquidity and not take undue risks to maintain their top-line numbers. It remains to be seen how the industry and PEL shall come out of the ongoing NBFC crisis but PEL is a stock to look out for in this segment, solely on the basis of their past performance and their focus on maintaining asset quality and their rigorous risk management.
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