This is the 2nd 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.
HDFC AMC is the leading mutual fund house in India. It is the market leader in actively managed equity funds space and a trusted mutual fund provider for individual investors which is evident in their high individual account numbers and AUM. The company had a muted quarter due to a fall Equity AUM and the massive redemptions in credit risk funds. The company has done well to focus on cost savings and facilitating online registrations and transactions to cover for difficulties in physical transactions due to COVID-19. It is also good to see that the management has added 2 new portfolio managers to its roster and is also planning to establish a feeder fund for international investments thus opening up a new and highly sought after product segment. It remains to be seen how the COVID-19 situation will unravel and how it will continue to affect the investment sentiments in India. However, given the company’s strong past track record and its leadership position in the industry, the medium and long term outlook for HDFC AMC remains intact.
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 fall in new premium but renewal premium remains strong despite the tough environment. The company has also done well to take sight of the current situation and launch the Group Poorna Suraksha plan which is the first of its kind group insurance for the workforce. 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.
ITC has been one of the biggest conglomerates in the history of modern India. The company has done well to diversify into other FMCG segments and build many leading brands like Aashirvaad, Bingo, etc. The company has seen a modest performance in the current quarter with severe disruption in its FMCG-Cigarettes and the Hotels business due to the lockdown. The company is doing well in maintaining a leadership position in many of its brands. The company has shown resilient growth in its FMCG segment due to the increase in at-home consumption and the migration towards trusted brands in the food space. It has also done well to expand the manufacturing capability of Savlon Brand and to capitalize on the demand surge for Health & Hygiene products by introducing many new products under the Savlon brand. It remains to be seen whether there are any more disruptions in the future from COVID-19 and how long will it take for the Hotels business to get back to its feet. Nonetheless, given its history of building and maintaining durable brands, its leadership in various operating segments, and its mammoth cash-generating ability, ITC remains a critical stock to watch for any investor interested in the themes of FMCG and consumption.
Sterlite Technologies saw a big revenue and profit decline in the current quarter. The company has had a dismal quarter mainly due to loss of operations in both services and product businesses during the lockdown period. The management expects the recovery to be steady in H2. The way forward for the communications industry seems to have been pushed towards data much faster due to COVID-19. As remote working and cloud infrastructure becomes more and more relevant, the demand for an end to end network solutions providers like Sterlite is also expected to rise. The company is making good investments and partnerships in the industry to enhance its capabilities and take advantage of the upcoming demand wave for stronger networks and more and more data centers. There is a massive opportunity in the cards for the company from the development of the 5G ecosystem announced by Reliance based on Open RAN technology where Sterlite is one of the frontrunners in India. It remains to be seen how the uncertainty around COVID-19 unravels and how fast will the company be able to adapt and take advantage of the post COVID world. Nonetheless, given the company’s capabilities in providing integrated and tailored network solutions, its expanded production capacity, and long-running order, Sterlite Technologies looks like a pivotal stock to watch out for in the communications technology space.
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