This is the fifth post in our quarterly update series for Q4 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.
Bajaj Auto has been a long performing player in the automobile sector that has established itself as a dominant player in all the segments that it operates in both in India and abroad. Despite the expected decline in domestic business, the export business has helped raise the overall performance of the company. Q4 was a dismal quarter for the company especially in terms of domestic sales. The company did well to maintain its market share in the industry decline and rapidly raise its export proportion. The lockdown due to COVID-19 has hit the auto industry particularly hard and the company is no exception. But the company is expected to have managed better than its competitors mainly due to its performance in international markets. It remains to be seen how long will it take for the auto industry to revive from the triple threats of demand slowdown, BSVI price increases, and COVID-19 disruption. Nonetheless, given the company’s position in export markets and its strong presence in all market segments in the two-wheeler market and three-wheeler markets, Bajaj Auto remains a pivotal auto sector stock to watch out for.
Bandhan Bank has aggressively grown its business over the last few years. In Q4FY20, it maintained its growth in loans and added customers at a decent pace. However, COVID -19 impact can negatively impact their operations. Management is confident that the business would come back to normalcy in due course. They have halted collections for the moment as they want to give time to their customers to restart their business and pay the loans comfortably. The market is worried that they’re over-concentrated in the eastern and north-eastern parts of the country. Another concern is that the bank has been slow in diversifying into newer businesses, thereby remains dependent primarily on the micro-finance business. A lot of uncertainties due to external events and internal structure of the business is putting the pressure on the stock price. It remains to be seen how the story plays out in the medium term. But, Bandhan Bank remains an important company to keep a track on the microfinance business in India.
Manappuram Finance has long been one of the most consistent players in the NBFC sector in India. The company has cemented its position as one of India’s gold loan providers in India by growing its core business consistently. The company’s current quarter performance has been very good with >20% YoY AUM growth across all segments. The rise of Asirvad in FY20 has been particularly good. The company has done well to emphasize good risk management for the MFI unit by capping lending % at both state and district level. The company has also seen good traction in the online gold loan which is expected to keep growing even faster in current times of COVID-19 disruption. It remains to be seen how the company’s collections will be affected once the quarter ends and collection for disbursals in FY21 starts. Nonetheless, given the company’s resilient customer base and gold loan AUM along with the rising star among MFIs in India Asirvad Microfinance, Manappuram Finance seems like a pivotal finance stock to watch out for.
Tata Consumer Products
Tata Consumer Products has a very good product portfolio in diverse F&B segments and strong brands like Tata Tea under its umbrella. The company has also appointed a new CEO who has had a lot of experience in the F&B industry in India with major brands like Whirlpool, PepsiCo, Coca Cola, etc. The newly merged entity of Tata Consumer Products aims to leverage the synergies and brand building experiences of the company and new CEO to forge a new FMCG major in India. The company’s retail businesses have been doing well despite the disruption across the world from COVID-19. The company did face severe supply chain issues at the start of the lockdown period and has managed to resolve them now. It remains to be seen how the company’s wholesale businesses which have the worst hit from COVID-19 fare going forward. Nonetheless, given the company’s leadership position in its top brand segments, its enhanced distribution after the merger, and the incoming synergies and benefits from integration, Tata Consumer Products remains a good FMCG stock to watch out for.
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