This is the 14th post in our quarterly result update series for Q4FY21.
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.
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Please click on the read more button for more details on each stock.
IRCTC has seen a tough FY21 as travel has remained largely subdued with the catering segment suffering the most in the year. But it has shown good QoQ recovery especially in ticketing revenues which should indicate that business is slowly is coming back to normalcy. The company also has a lot of plans for expansion in the private trains space and is actively looking for a partner to finance this expansion. It is also looking to gain an additional revenue source in internet ticketing by inserting itself in the booking of the non-reserved classes and increasing the % of total booking for Indian Railways while slowly replacing offline ticketing as much as possible. It remains to be seen how the company’s plans in the privatization of trains go and how long will it take for normal consumer behaviour to resume. Nonetheless, given that IRCTC has a near-monopoly in its space and from the resilient demand for its services and products in railway stations, IRCTC remains a good stock to watch out for investors betting on the railways theme.
The company has had a down quarter with an 8-9% YoY decline in sales & profits while all margins have risen YoY. Consumer pack sales were at their highest ever with around 50% of the top line coming from this segment. The health portfolio has seen the launch of India Gate Chia Seeds and India Gate Flax Seeds. The company has been marred by controversy due to the detention of Mr. Anoop Kumar Gupta, Joint Managing Director of the Company, by the Enforcement Directorate while cooperating with the investigation in the Augusta Westland case. But the company continues to show good performance and a resilient balance sheet that has enabled it to almost eliminate net debt from the company. It remains to be seen how the company will navigate this PR crisis and what roadblocks it will face in its quest to reach Rs 8000 Cr sales in 3-4 years. Nonetheless, given the company’s long-standing brand image, its resilient operations and export structure, and its focus on maintaining its strengths and developing new avenues, KRBL may turn out to be a prime wealth creator in the next few years.
LTI has had a good Q4 with major deal wins including from including 2 deal wins with Net TCV of $21 and $ 45 million each. The management expects more deal wins and is also expecting a demand comeback from oil & gas clients in the future. It is now looking to focus on Fortune 200 companies as they will be the next frontier for LTI to expand into. It remains to be seen how the company will be able to sustain its growth momentum and the increased competition in the tech space. Nonetheless, given the company’s ever-increasing roster of marquee clients and its focus on driving growth from cloud & data products, L&T Infotech is a pivotal technology stock to watch out for.
Ramco Systems had a decent quarter with revenues rising 10.9% YoY with a profit of Rs 7 Cr vs a loss of Rs 5 Cr in Q4 last year. It had a good FY21 so far with a total order book of $182 million. The management has repeatedly emphasized the importance of the SaaS cloud model going forward for all its verticals. The management remains confident of the demand going forward despite admitting to the lumpiness of revenues at the same time. It remains to be seen whether this earning momentum can carry on in the quarters to come and whether the company will be able to fulfill its promises of superior implementation times without any compromise on quality. Nevertheless, Ramco Systems is one stock to watch out for in the IT product space.
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