This is the 1st post in our quarterly result update series for Q1 FY21.
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.
Bajaj Auto
Bajaj Auto has been a long performing player in the automobile sector that has established itself as a dominant player in all the segments that it operates in both in India and abroad. Despite the expected decline in domestic business, the export business has helped mitigate the fall in performance for the company. Q1 was a dismal quarter for the company especially due to more than 68 days of manufacturing inactivity. The company did well to maintain its market dominance and increase market share in motorcycles despite the industry decline. The lockdown due to COVID-19 has hit the auto industry particularly hard and the company is no exception. But the company is expected to have managed better than its competitors mainly due to its performance in international markets. It remains to be seen how long will it take for the auto industry to revive from the triple threats of demand slowdown, BSVI price increases, and COVID-19 disruption. Nonetheless, given the company’s position in export markets and its strong presence in all market segments in the two-wheeler market and three-wheeler markets, Bajaj Auto remains a pivotal auto sector stock to watch out for.
Bajaj Finance
Bajaj Finance is one of the fastest-growing NBFCs in India today. The company has done well to bounce back quickly from in the post-COVID situation and has seen good traction across most categories. The company has done well to convert many of its term loans to Flexi loans, increasing customer convenience, and earning fee income along the way. It has also remained conservative by increasing its COVID provisioning to Rs 2350 Cr. It remains to be seen whether there are any further disruptions in place from the evolving situation from COVID-19 in India and how it will impact the company’s operations. Nonetheless, given the company’s strong market position, the management drive to derive new opportunities through the use of data and technology, and its strong balance sheet position, Bajaj Finance remains a pivotal NBFC stock for all Indian investors.
CRISIL
CRISIL has been a trusted financial service and information provider for a long time. They have established themselves as a reputed name in their operational fields of ratings, research, and advisory. The company saw a good response to the rating business while the research business grew steadily with the addition of Greenwich Associates to the company’s umbrella. The advisory business suffered a lot due to delays in contract closures from COVID-19. The company has guided that the oncoming period will be tough for both the Indian and World economy. It remains to be seen what second-order effects the COVID-19 situation will have on the company’s performance going forward. Nonetheless, given the company’s industry position and its financial resilience, CRISIL remains a pivotal stock in the rating sphere. The valuation multiple of the company continues to be near the lowest level in the last ten years which makes it an attractive potential investment for the long term.
Tata Elxsi
The company had a good quarter with stable revenue growth and robust PBT growth. The company continues to see good growth in the emerging medical space and the media & communications space. It has also managed to improve its offshore ratio and keep travel expenses minimal which has helped boost PBT growth. The auto segment continues to be subdued due to the COVID-19 situation. It remains to be seen how the company’s major clients cope with the disruption caused by the pandemic and what impact it shall have on the company’s performance going forward. Nonetheless, given the company’s strong technological capabilities and its resilient performance in the last year, Tata Elxsi remains a good technology stock to watch out for, particularly given the rising demand for its services in the broadband and media & communications spaces.
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