This is the eighth and the last post in our quarterly update series for Q3.
In this post, we’re sharing the latest updates from the last set of seven 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 under these two conditions —
- Their business continues to do well and,
- They are available at valuation which we find reasonable with sufficient margin of safety.
We have made notes from their quarterly updates and the analyst conference calls and sharing that information with you here.
You can see the earlier updates here.
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Please click on the read more button for more details on each stock.
KNR Constructions is engaged in the business of infrastructure sector, primarily in the construction of roads, bridges, flyovers and irrigation projects.
Given the strong visibility of revenues due to healthy order book built up and their relentless focus on balance street strength, they are in a strong position to benefit in due course. Valuation at current levels are also reasonable at around 14times earnings (TTM). Debt equity ratio is also very comfortable at 0.19. The most important factor to watch would be execution of projects in the next four to six of quarters.
Hester Bio Science
Hester Biosciences Limited (HBL) is a publicly traded Indian company headquartered in Ahmedabad. It is an animal and poultry vaccines manufacturing company with plants situated in Gujarat and Nepal. The company is India’s second largest poultry vaccine manufacturer currently with a 30% market share of the poultry vaccines market in the country.
Hester Biosciences is fast rising player in the animal healthcare industry. They maybe small but they have achieved phenomenal growth in the past and have managed to do so while improving their margins at all levels. The company is aggressively pursuing international markets with product registrations and marketing and distribution channel setup both in rural India and Africa.
Mahindra CIE Automotive Limited is an auto components supplier with presence in many technologies, which include forgings, castings, stampings, magnetic products and composites. The Company is focused on the automotive market, including cars, utility vehicles, commercial vehicles and tractors.
The company has done well to improve their margins in the Indian business which has led to greater profits. But the auto industry which is the principal market for the company has been flat in the past 2 quarters and is expected to stay the same in the near future. Along with declining margins in their European operations, it remains to be seen how the company deals with the slowdown in auto and auto-component market at home.
Nestle India Ltd
Nestle India is a subsidiary of NESTLÉ S.A. of Switzerland. The products offered by Nestlè in India range across categories such as milk and nutrition, chocolates and confectionary, beverages and prepared dishes and cooking aids. Some of the famous brands of the company are Nescafe, Nestlè Everyday, Sunrise, Maggi, Kitkat, Milkybar, Milkmaid, Nestea, Munch, Bar one, Polo and many more.
The company is growing at a rate of more than 11%. That’s a very good growth performance considering its size, category and market penetration. The company still has significant room to grow their revenues by increasing exports given that exports count for only 7% of total sales. However, at the current high valuation, it is prudent to tame return expectations in the near term.
Power Mech Projects Ltd
Power Mech Projects Limited operates as an engineering and construction company, which provides erection, testing and commissioning (ETC), civil and operation and maintenance services for power projects.
The company is doing well to reduce their dependency on the power sector and on BHEL. The order book has also been consistently growing paving the way for them to maintain their current growth trajectory of more than 20-25% per year for the next couple of years. However, EPC space is a very crowded space with a lot of competitive pressure.
CCL Products (India) is engaged in the manufacturing of instant coffee. It is engaged in the manufacture of soluble instant spray dried coffee powder, spray dried agglomerated/granulated coffee, freeze-dried coffee and freeze concentrated liquid coffee.
They have been aggressively expanding their capacities and have been committed to running a volumes driven business model. The main concerns for the company shall be whether they can make their volumes grow in order to keep their rising capacity at optimal levels. Also establishing themselves as a brand in the domestic market where Nestle has already captured more than 50% of the market share is going to be tough to say the least.
Apcotex Industries Ltd
Apcotex Industries Limited is one of the leading producers of Synthetic Lattices (VP Latex, Acrylic Latex, Nitrile Latex) and Synthetic Rubber (HSR, SBR) in India.
Apcotex have been one of the market leaders in the synthetic rubber industry in India. They have showed good performance in this year with highest ever quarterly sales in this quarter. The company has been aggressive in their plans to expand capacity and ramp up revenues. Considering the growth prospects, the valuation appears reasonable.
Soon the Q4 results will be out. As we start sending out the updates on our watchlist stock for the new quarter, you may notice that some new stocks will have replaced some old names. However, the information that we have gathered on those replaced stocks will continue to exist on our stocks page.
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