This is the ninth post in our quarterly update series for Q3 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 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.
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Please click on the read more button for more details on each stock.
Allcargo has cemented its place as one of the top 10 shipping and logistics companies in the world. The last quarter was modest with modest revenue and PBT drop. The company has done well to mobilize the transaction to sell its warehouse division to Blackstone and use the proceeds to reduce consolidated debt. The company has also entered into the acquisition of Gati Ltd which should help enhance the company’s portfolio of offerings and help it offer end to end solutions that no existing player is doing currently in India. It remains to be seen what the actual impact of the coronavirus situation will be on the company’s operations. Nonetheless, given its market position and its enhanced portfolio of offerings, Allcargo remains a good stock to watch out for in the logistics space.
Cupid is a leading condom maker in India. It is also one of the only 3 WHO-approved female condom manufacturers in the world. It exports its products to over 66 countries around the world. The company has done well in the past one year to bag international orders and this trend has continued in the current quarter as well where it delivered YoY revenue growth of 2.9 times and profit growth of 4 times. The company seems to be well placed with a strong order book ensuring revenues of more than Rs 40 Cr each quarter for the next 3 quarters. It has also made some inroads into the USA market and expects to start selling its products from H2FY21 onwards. The only major reason for concern for the company is the long working capital cycle which stems from long shipping times and long payment cycles for tenders and orders from non-profit organizations. Nonetheless, given the company’s long history of innovation and expertise in this field and the consistently high sales growth, Cupid is a good small-cap stock to watch for.
Heidelberg Cement is one of the leading cement makers in South and Central India. The company has had a good year so far with 2 of its highest ever earning quarters in the past 9 months. The company is running at greater than 90% capacity utilization which showcases the demand for the company’s products. The growth in the premium product mycem has been very encouraging. It remains to be seen whether the tailwinds behind the cement industry growth in the recent past will persist and how will the major customer industry segments of infra and housing fare in the future. Nonetheless, given the company’s consistent performance, its close association with its parent Heidelberg Cement Group and its strategic geographical positioning in India, Heidelberg Cement remains a good cement stock to watch out for.
KNR has been one of the top performers in the construction industry this year. Despite the industry headwinds and the general plight of the companies in this sector due to delay in payments from NHAI, KNR has been able to clock an impressive 21% revenue growth while improving its margins substantially. It remains to be seen how long the company can manage to maintain its current margin profile which is among the best in the industry. It also needs to be seen how will the road projects announced by in the Union Budget in January will be awarded and how many will the company be able to win. Nonetheless, given the company’s spectacular performance so far in FY20 and its robust balance sheet, KNR remains one of the best construction stocks to watch out for.
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