This is the sixth post in our quarterly update series for Q2 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.
Advanced Enzymes
Advanced Enzymes has been a market leader in the enzymes industry in India. The company has built an impressive portfolio of products and subsidiaries all over the world. The past year has been muted for the company with <10% revenue growth and capacity utilization at only 50%. The management asserts that they have been in a consolidation phase in the past year and they should start seeing growth from Q4 onwards. It remains to be seen whether everything will go according to what the management has stated and the current predicament is not a result of a deeper systemic issue. Nonetheless given its market positioning in the enzyme industry in both India and abroad and the company’s track record, Advanced Enzymes remains an interesting stock to watch out for.
Balkrishna Industries
BKT has been a rising player in the off-road tires business for years now. They have indeed suffered from volume contraction of 14% YoY but they remain committed to the CAPEX plans. The company has stayed to true to their commitment to increase brand presence to drive growth in India and abroad, all of which is evident from their various branding initiatives and incremental advertising costs. As mentioned above, the broad industry is in a slowdown and it remains to be seen how long these conditions persist. Nonetheless, BKT remains a good stock to keep an eye on considering their resilient performance and their efforts to keep margins stable and maintain their pricing advantage over their competition in such difficult industry conditions.
If you’d like to read our detailed analysis on BKT’s moat please click here.
Galaxy Surfactants
Galaxy Surfactants is one of the most consistent specialty chemical makers in India. The company has done well to achieve sales volume growth despite the domestic slowdown and has even achieved profit growth despite de-growth in revenues. This was mainly due to good product mix, favorable raw material prices and good performance in key overseas markets. The company is optimistic about its prospects in the near term despite the domestic demand slowdown in the FMCG sector. The management has acknowledged that growth in India will be muted for the rest of the year and the growth for H2 will be primarily driven by export markets. It remains to be seen whether the export market growth seen in the current quarter sustains and builds up in the coming quarters or it gets pressured due to external factors. Nonetheless, Galaxy Surfactants have proved themselves as a good specialty chemicals stock to watch out for, particularly given their recent performance and their geographically diverse set of MNC customers.
Thomas Cook India Ltd
Thomas Cook is the biggest travel company in India. They have been innovators in the sector for more than a century now. The company has shown good resilience despite setbacks to the travel industry from the Jet Airways Fiasco and the demise of Cox&Kings. At such a time, when the core holiday business suffered, the other businesses like forex, MICE and corporate travel have risen to fill the void and help the company keep revenues up. The bankruptcy of Cox & Kings has freed up some space in the incumbent travel market but it has also depressed market sentiment and consumer trust. It remains to be seen how fast will these sentiments recover and how Thomas Cook will capitalize on this opportunity. Nonetheless, Thomas Cook is a good stock to watch out for, particularly given their industry experience and their widely diversified sources of revenues.
Update from the Management on 25.11.2019: 6th December 2019 has been fixed as the record date for the purpose of determining the shareholders of TCIL who shall be entitled to receive the equity shares of Quess Corp in the process of Demerger. You may refer our previously quarterly updates on the same to know more.
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