This is the 1st 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.
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Please click on the read more button for more details on each stock.
CCL Products (India) Ltd
CCL has already established itself in the wholesale coffee space for many years and their foray into branded sales through the Continental Coffee label has been very encouraging. The company has had a good quarter on the back of almost 100% utilization at the Vietnam facility. The company’s branded business is growing well and the management has reassured that growing the top line is the primary concern for this division. The company is doing well to capitalize on its unique offerings and is working hard on expanding its influence. This is evident from the response seen from customers for its new cold brew product and its other niche products. It remains to be seen how the coffee industry will come out from COVID-19 and whether the branded business will be able to maintain its growth momentum. Nonetheless, given the enormous market opportunity for the branded business in the domestic market, CCL products may turn out to be a dark horse in the global coffee industry in the years to come.
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 Q2FY21 with more than 20% growth in Balance Sheet and advances. It is a testament to the bank’s brand image that the bank is able to bring back operations to pre-covid levels in almost all of its operating segments. The management remains optimistic about the potential opportunity for the bank from digitization and its role in creating never before seen user experience journeys in diverse segments like unsecured personal loans and car loans. It remains to be seen how the whole COVID-19 scenario will pan out in the near future and whether there are any surprises in store from it still. The bank has seen its iconic CEO Mr. Aditya Puri step down and the new CEO Mr. Sashidhar Jagdishan assumes the post. 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.
HDFC Life is one of the front runners in the life insurance industry in India. The company has gone from strength to strength and maintained a good balance of new business and existing business while consistently growing over the years. The company has done well to adapt to the new normal and remained conservative in current uncertain times. The results show a big rise in Individual WRP market share and renewal premium remains strong despite the tough environment. The company has also done well to maintain its focus on operational segments like enhanced sales training and digital onboarding which should yield well in the future. It remains to be seen whether the situation ahead unfolds within the company’s expectations or whether we may see more uncertainty arising from COVID-19. Nonetheless, given the company’s market positioning, its dynamic product portfolio, and its emphasis on the development of non-traditional channels and innovative products, HDFC Life remains a pivotal insurance stock in the country.
Tata Elxsi had a good quarter with stable revenue growth and robust PBT & PAT 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 other expenses minimal which has helped boost PBT growth. The IDV segment also seems to have been revived with a continued focus on cross-selling this segment services to EPD customers. 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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