This is the 3rd post in our quarterly result update series for Q3FY21.
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 Finance
The current quarter was dull for Bajaj Finance with revenues and AUM growth flat YoY while profits fell due to increased provisions. But the current cautious stance of the company is commendable with it deciding to frontload potential losses and focussing on building an omnichannel framework and app ecosystem with its sights at the next evolutionary phase of commerce in India. It remains to be seen whether there are any further disruptions in place from the evolving situation from COVID-19 in India and whether the company’s worst fears regarding credit losses come to exist. 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.
Jyothy Labs
The performance of Jyothy Labs was very encouraging in this quarter mainly on the back of sustained good performance of dish wash and increasing rural penetration. The company has done well to increase sales volumes on the back of small packs and see the rise of the personal care segment and recovery of the fabric care segment. The company still faces the issue of very slow recovery in the post-wash segment which is the company’s biggest earner. It remains to be seen how long will it take for the post-wash segment to revive and how the company will fare in the increasingly competitive environment in the health hygiene space. Nonetheless, given the renewed focus on health and hygiene going forward and the company’s good distribution reach and resilient product portfolio, Jyothy Labs may turn out to be a pivotal FMCG stock to watch out for.
Mahindra Holidays & Resorts India Limited
MHRIL saw a good standalone performance in India with resort occupancy rising to 85% in Dec. The company is also seeing the long duration products come back to normalcy and product mix shifting towards the long end. It has a big cash chest of above Rs 800 Cr which it plans to utilize to expand room inventory in the next 3-4 years. On the other hand, HCRO has seen performance fall due to the second wave coming back to Europe. But the management remains confident of HCRO’s prospects in the near future. Even though travel and tourism is a sector that seems to take a long time to recover and come back to normalcy, MHRIL is utilizing its firepower (read Balance Sheet strength) to continue its expansion plans in Goa and other sites. It remains to be seen how long will it take for sentiments to normalize in the travel sector and whether the company will be able to capitalize on its resilient balance sheet and cash reserves to make any aggressive moves on Capex. Nonetheless, given the company’s resilient model and the current valuation is not too far from its replacement cost, MHRIL can turn out to be a pivotal travel sector stock in the times ahead.
Nippon Life India Asset Management
NAM saw good performance in Q3 with profits rising as high as 42% YoY despite sales rising only 10% YoY. The company continues to have a good hold in the IFA space with this channel being the largest distribution channel for the company and has seen good participation in its recent NFOs. It is also looking to maintain its growth momentum in the ETF space and bring in new investors to this asset class. It continues to bring in old customers who are now looking to restart their relationship post the rebranding. It remains to be seen whether the company will be able to match the pace of growth of its prime competitor HDFC AMC in this space and whether it will be able to maintain its growth momentum going forward. Nonetheless, given the company’s market positioning and its competitive advantage in the ETF and AIF space, Nippon Life India Asset Management is a must-watch stock for every investor interested in the AMC space.
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