This is the eleventh 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.
Cupid Ltd
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 80 countries around the world now. 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 FY20 revenue growth of 87% YoY and profit growth of 1.6 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. The company has yet to face any direct disruption from COVID-19 other than the disruption to shipping during the lockdown period. It remains to be seen how the COVID-19 situation pans out and whether it will have a direct impact on the condom industry or not. 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.
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 a dip in revenues. The company suffered a revenue decline despite volume growth mainly due to a fall in fatty alcohol prices which forms around 52% of its requirements. The company has seen good growth coming from the AMET region particularly Egypt and demand in India reviving. The company is expecting good demand for its products going forward due to the renewed focus on health & hygiene going forward. The company has enough spare capacity to handle any upsurge in demand. It remains to be seen how the whole situation will pan out going forward and what final impact it will have on the global economy and whether the focus on health and hygiene is going to stay or not post COVID. Nonetheless, given the company’s robust product portfolio and the ever-increasing list of both FMCG majors and niche specialty product makers, Galaxy Surfactants remains a good stock to watch out for in the specialty chemicals space.
Mayur Uniquoters
Mayur Uniquoters has been one of the biggest artificial leather makers in the world. But the company has been through a rough patch in the past few years with stagnant revenues and decline of the unorganized footwear segment which was a big revenue generator for the company. The company is making good inroads into the auto-export segment. The OEM export revenues has risen 58% YoY indicating good performance in this segment. This is also good for the company as the realization per meter from OEM exports is more than double the realization from domestic OEMs. The management remains confident of the product’s technical and quality edge. It remains to be seen how long the current slow auto environment continues and how long will it take for the management vision to materialize. Nonetheless, given its dominant market position both in the domestic and export segments and the management’s focus on not compromising on quality no matter what, Mayur Uniquoters remains a good small-cap stock to watch out for.
Thomas Cook
Thomas Cook is the biggest travel company in India. They have been innovators in the sector for more than a century now. The company is going through the toughest of times with the travel industry being hit hard due to COVID-19. The management is doing well to use this period of slow operations to focus internally and improve the cost structure and operations of the company while seeking to reimagine how the industry will be changed from the ongoing pandemic. It remains to be seen how long it will take for things to normalize for the travel industry and how consumer behaviour will evolve from COVID-19. Nonetheless, given the company’s resilient balance sheet and the management focus on improving the internals of the company and to focus on new avenues for the industry, Thomas Cook seems to be a resilient travel industry stock in an industry plagued with shutdowns and bankruptcies these days.
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