This is the fifth and the last post in our quarterly update series for Q4 FY19.
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 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.
CCL have proven themselves to be a mainstay in the Indian coffee industry. Recently, they have lost a big repacking customer in FY19 which has resulted in a volume fall of 2000 tonnes. However, the company’s foray into retail and brand sales have been encouraging and they expect this segment to rise fast and bring the company to higher trajectory of growth. Although the risk of volatile green coffee prices is present, CCL have proven themselves as seasoned players in the field and should be able to prevent any adverse impact from this source. Taking into account the company’s encouraging sales growth and expectations in the USA and EU, CCL looks to be a reasonable bet on the coffee consumption market.
Sterlite Technologies is in a midst of a transformation where they are moving from an asset heavy products business to a blended product/service provider. This period is critical for the company and the next couple of years will chart its journey for the future. So far, the company has shown good growth in their new business segments and have amassed a massive order book. However it remains to be seen if the momentum carries on going forward as well. The looming threat of the promoter pledge has now gone out of the picture. In a recent communication to stock exchange they have informed about the removal of entire pledge on company’s shares. But the market does not seem to be excited by it. In their recently released Annual Report of FY18-19, they have laid out plans for fund raising in tune of a thousand crores. Hence, FY19-20 would be an interesting year for Sterlite. We at SSS, are also keeping a close watch.
Thomas Cook India Ltd
Thomas Cook has been one of the oldest corporate entities in India. They have been innovators in the travel industry and continue to add businesses and acquire companies which can add on to their already wide portfolio of services and products. Thomas Cook has been on a consolidation path for quite some time now. This has already started to pay off with the steady growth of their prepaid card business and the rising number of bookings through the online medium. All in all, Thomas Cook is a good bet on the travel industry. However, one of their big acquisitions of Sterling Holidays, a vacation ownership company, has been a drag on their performance. Hence, next few quarters are very important to gauge the progress.
Minda Industries has been one of the top auto ancilliaries provider in the country. They have steadily expanded their product offerings such that their kit value is increasing year on year with the addition of newer products in the mix. Their foray into alloy wheels has rewarded them well and is expected to deliver good growth for the company in the future. Despite the slowdown in the auto market, Minda aspires to maintain a double digit growth rate mainly on the back of their expanding product portfolio and the greater demand for their products post BS VI implementation. But at the same time they are totally dependent on the domestic auto market very heavily and any negative surprise in this sector or from one of their key clients like Maruti may bring their growth to standstill easily. Nonetheless, Minda Industries is definitely one stock to keep an eye on as they seem to be one of the companies best positioned to benefit rapidly once the BS VI regulations are implemented and become the norm.
Relaxo Footwears Ltd
Relaxo is one of the most recognizable names in the footwear industry in India after Bata. The company has been doing well with its offbeat model of focusing on distributor network and wholesale operations as compared to other players in the market like Bata and Khadims, all of whom sell directly to customers through multi-brand outlets and exclusive franchise stores. Relaxo has established itself firmly with its resident model and is now looking to expand into the franchisee model as well. Along with growth in the new sales channels of EBOs and online sales, the company is also looking to expand capacity slowly and steadily each year. Keeping all this in mind, Relaxo seems like a good investment option for anyone looking to put money on the theme of rising consumption and footwear. However, valuation appears to be too stretched for any margin of safety.
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