This is the 12th post in our quarterly result update series for Q1FY21.
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 had a dismal quarter due to one month of production loss and labour issues slowing down the company’s operations revival. The company seems to be well placed with a strong order book ensuring revenues of more than Rs 123 Cr. The company is also looking to expand into the medical devices field and to register its female condom with the FDA to start sales by the end of next year. It remains to be seen how the COVID-19 situation pans out and what challenges the company faces in its foray into the medical devices field. Nonetheless, given the company’s long history of expertise in this field and the consistent sales growth and expanding order book, Cupid is a good small-cap stock to watch for.
HDFC Bank
HDFC Bank is the biggest bank in the country by market capitalization. It has deservedly earned its stellar reputation over the years. The bank has performed well in the first quarter of FY21 with more than 22% growth in Balance Sheet and advances. It is a testament to the bank’s brand image that the bank saw deposits and advances growth even in times of COVID-19. The management has assured that the bank has adapted to the new normal due to the COVID-19 disruption and that its balance sheet and customer set are resilient enough to weather the uncertainty ahead. It maintains that 98% of customers under moratorium have not seen any decline in salaries and thus the bank is safe from any negative surprises coming from the moratorium ends. It remains to be seen how the whole COVID-19 scenario pans out and how it changes consumer behaviour especially for the banking industry going forward. Nonetheless, given the bank’s resilient customer set, strong liquidity profile, and enduring brand image, HDFC Bank remains an indispensable banking stock for every investor, more so because of the recent correction in valuation.
Kotak Mahindra Bank
Kotak Mahindra Bank is the second-biggest private bank in the country by market capitalization. It has deservedly earned its stellar reputation over the years. The bank has performed resiliently in Q1FY21 with more than 34% growth in savings deposits and has gotten 18% YoY growth in NII despite flat advances. The company has done well to keep its books resilient with more than 80% of loans under moratorium 2.0 being secured. It has also seen a very good rise in the digital channels and plans to use this consumer shift to better compete with peers who have a much larger physical presence. It remains to be seen how the COVID-19 situation will unravel and what final impact will the end of the moratorium unravel for the company. Nonetheless, given the bank’s track record and the capability and vision of the management over the years, Kotak Mahindra Bank remains a pivotal banking stock for every Indian investor.
Piramal Enterprises
Piramal Enterprises is facing the heat of the challenging economic environment and downturn in the real estate sector. Although the prospects of the pharma business seem good, the financial business is expected to stay muted for FY21. The company is constantly working on improving the liquidity condition of its Balance Sheet and has also managed to raise capital in Q1 both through a stake of 20% in Piramal Pharma and raising debt. The company is doing well to use this downtime to develop its retail lending platform and target underserved geographical and population segments. 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, particularly in the real-estate lending space.
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