This is the 10th 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.
Bandhan Bank
Bandhan Bank has aggressively grown its business over the last few years. The company had a decent quarter with good YoY growth in deposits and loans. Management is confident that the business is back to normalcy and is now looking to implement a new 5-year development plan. The company is seeing good traction in mortgage and commercial lending businesses. It is also confident of leveraging its existing customer set effectively to maintain its growth rate and upscale old MFI customers into SME loans. There are still a lot of uncertainties due to external events and the internal structure of the business is putting pressure on the stock price. It remains to be seen how the story plays out in the medium term and whether things will come back to normalcy as reported by the management. Nonetheless, given its consistent growth momentum in recent years and its rapidly expanding customer set, Bandhan Bank remains an interesting company to keep track of the microfinance and small finance banking industry in India.
Galaxy Surfactants
Galaxy Surfactants is one of the most consistent specialty chemical makers in India. The company has done well to achieve good sales volume & profit growth and has managed to maintain EBITDA/ton due to increased utilization and launch of new products. The company saw revenue growth despite modest volume growth mainly due to a rise in fatty alcohol prices and demand for new products. The company has seen good growth coming from India as demand comeback was strong for all tiers of customers. The company is expecting good demand for its products going forward due to the renewed focus on health & hygiene and the new products of nontoxic preservatives and mild surfactants. 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.
Marico Ltd
Marico is one of India’s leading FMCG companies with many market-leading brands like Saffola and Parachute. The company has done well to maintain value growth on a YoY basis in almost all categories and sustain growth momentum in domestic business. It is showing encouraging performance in the food category. The company has seen decent growth in overall volumes and has maintained its leadership position in all categories highlighting good brand resilience. In light of the COVID-19 disruption, the company has done well to develop direct distribution channels and rationalize its SKUs The company’s focus on expanding into new health food categories under the Saffola brand and the in-demand hygiene looks shows good room for growth in these segments. It remains to be seen how long the COVID-19 situation lasts and what second-order effects it has on the company and general consumer behaviour. Nonetheless, given the company’s solid standing in its core categories, its expansion plans for high margin food categories, and its robust distribution network, Marico looks like a pivotal FMCG stock to watch out for.
Vaibhav Global
Vaibhav Global has established itself as an influential player in the jewellery exporting and telecommerce business. They have consistently delivered good revenue growth in recent years and continue to grow their business through new selling mechanisms and product offerings. The company has had another blockbuster quarter with profit growth of 45% in the current uncertain times. It has expanded its customer engagement to a more varied customer base than its traditional jewellery customer set and into newer segments like beauty and home care. The company is also looking to slowly establishing its presence in the digital medium where sales growth has been the fastest. It remains to be seen how long the company will be able to maintain its current growth pace and match up to its other TV sellers rivals like QVC and JTV, all of which have an established customer base and earns way higher per household than the company. Nonetheless, given the company’s prudent and efficient cost management, its resilient supply chain, and its agility to introduce new products fast depending on changing situations, Vaibhav Global seems to be an interesting jewellery stock to watch out for.
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