This is the 5th post in our quarterly result update series for Q2FY21.
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.
If you don’t want to miss these updates, please subscribe to our mailing list.
Please click on the read more button for more details on each stock.
Blue Star is one of the largest cooling solutions providers in the country. It is one of the biggest branded players in the RAC market. The company has seen a decent recovery in revenues and profits for Q2FY21. The major reason for this performance was the bounce back in the unitary products division and the restarting of EMP projects. The company has done well to rationalize inventory and remain prepared for the festive season. It has also seen good growth in the water purifier segment where it has already captured a 3% market share. It remains to be seen whether the estimations of industry revival remain on track as mentioned by the management and whether there are further disruptions in store from the evolving COVID-19 situation. It will be interesting to see how the company will achieve its target of breakeven in the water purifier segment. Nonetheless, given the company’s strong market presence, its history of successfully completing EMP projects, and its robust presence in semi-urban and rural India, Blue Star is a pivotal white goods stock to watch out for.
Jyothy Labs is a consistent performer in the FMCG segment in India. They have successfully carved out a niche for themselves and have established themselves as market leaders in the fabric care and dishwashing segment. The performance of the company was very encouraging in this quarter mainly on the back of good performance of dish wash segment and increasing rural penetration. The company has done well to be able to achieve good growth in its prime dish wash segment and in the revival of the HI segment. The company still faces the issue of a fall in demand in the post-wash segment which is the company’s biggest earner. It remains to be seen how long will it take for the post-wash segment to revive and how the company will fare in the increasingly competitive environment in the health hygiene space. Nonetheless, given the renewed focus on health and hygiene going forward and the company’s good distribution reach and resilient product portfolio, Jyothy Labs may turn out to be a pivotal FMCG stock to watch out for.
Nippon Life AMC
Nippon India Life Asset Management is one of the leading asset managers in the country. The company has done well to bounce back after the rebranding last year. This was evident from the number of investor additions in Q2FY21 as well as the launch of new products like Nippon India Multi-Asset Fund, Nippon India ETF Nifty IT & Nippon India Nifty Smallcap 250 Index Fund. The company continues to have a good hold in the IFA space with this channel being the largest distribution channel for the company. It is also looking to capitalize on its expertise on ETFs and will continue to launch ETF products and bring in new investors to this space. It has also done well to win the post office mandate which cements its credentials as an institutional asset manager. It remains to be seen whether the company will be able to match the pace of growth of its prime competitor HDFC AMC in this space and whether it will be able to maintain its growth momentum going forward. Nonetheless, given the company’s market positioning and its competitive advantage in the ETF and AIF space, Nippon Life India Asset Management is a must-watch stock for every investor interested in the AMC space.
Piramal Enterprises is facing the heat of the challenging economic environment and downturn in the real estate sector. The company has seen a good bounce back in the financial division and good growth in the pharma division. The company has managed to complete the Carlyle deal and has brought the net debt to equity below 1 which is exceptional for a predominantly NBFC company. The company is doing well to launch the retail lending platform in Diwali and target underserved geographical and population segments that are not addressed by most of the competition. It remains to be seen how long will this slow period for financial services lasts for the company and what challenges will it face in establishing its retail lending platform. However, given their past track record, management capability, and surplus unallocated capital which can be deployed to support any of the conglomerate’s various businesses, Piramal Enterprises continues to be a good conglomerate stock to watch out for, particularly in the real-estate lending space.
If you don’t want to miss these updates, please subscribe to our email list.
And don’t hesitate to reach out to us if you have any questions.