This is the 3rd post in our quarterly result update series for Q4FY21.
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.
Aavas has done very well in Q4 with 24% YoY revenue growth and 45% profit growth. It has also maintained AUM growth of >20% despite disbursements falling 9.3% YoY in FY21. It also managed to do >100% collections in Q4 owing to falling 1+DPD in Q4. But the management admits that the collections will indeed fall as a result of local lockdowns and the overall impact of 2nd wave of COVID. It remains to be seen whether the company will be able to sustain the sky-high valuations that it is currently going at. However, stretched valuations may have factored in most of the positives. Nevertheless, it is a good business to track in the housing finance space, especially given its consistent and steady growth while maintaining good asset quality and underwriting standards.
Bajaj Auto has seen a good quarter with the 2nd highest ever export volumes and revenue growth of >20% in Q4. The company has seen good momentum continue in Pulsar 125 which has managed to capture a 19% market share in FY21 vs 7% in FY20. The company also showed some light on Chetak and the management stated that Chetak should start seeing sales in the next 6 months. The recovery of the 3-wheeler segment on the other hand continues to be slow and has also lost recent momentum due to the 2nd wave of COVID-19. It remains to be seen how the company handles the transition from a mass-market player to a premium focus auto major and from ICE to electric in both the 2 & 3-wheeler sectors. 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.
Persistent had another excellent quarter with many deal wins resulting in a TCV of $246.5 million and consolidated revenue and PAT growth of 21% & 64% YoY respectively. Q4 caps off a stellar year for Persistent which was evident from its action of awarding >100% bonus for all its employees. The management is also confident of the alliance business gaining momentum going forward. The company is also looking at possible acquisition opportunities and has maintained its steady rate of employee additions citing building capability ahead of the curve. It remains to be seen whether the company will be able to maintain its current momentum and how its India operations will be affected by 2nd Wave of COVID-19. Nonetheless, given its fast rise in recent years and its big presence in North America & its various Alliances, Persistent Systems remains a key technology stock to watch out for.
Sterlite has seen a good FY21 with around 191 patents filed in the year, including the company’s first 5G patent. There is a massive opportunity in the cards for the company from the widespread industry shift towards ORAN networks and the rising investments in the network connections space around the world and in India. It remains to be seen how the 2nd wave of COVID-19 unravels for Sterlite and how fast will the move towards 5G take place in the company’s principal geographies. 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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