This is the 5th 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.
Jyothy Labs is a consistent performer in the FMCG segment in India. They have successfully carved out a niche for themselves and have established themselves as market leaders in the fabric care and dishwashing segment. The performance of the company was very encouraging in this quarter despite industry disruption from the lockdown. The company has done well to be able to achieve good growth in its prime dish wash segment and in the revival of the HI segment. The company still faces the issue of fall in demand 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.
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 a blockbuster quarter with profit growth of more than 47% 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 mediums like social media. The company is also looking 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 seller 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.
Varun Beverages have been one of the biggest bottlers in India and has been quite proactive in international expansion for some time now. The company has seen a major decline in the quarter with a massive fall in on-the-go consumption. The lockdown has hit the company’s sales hard but demand seems to have stayed resilient as in-home consumption has risen along with juice consumption. It remains to be seen whether there is a further economic disruption in the future from COVID-19 which may have severe second-order effects on the company’s performance. Nonetheless, given the resilient sales network, the rising demand for the company’s products, and the arrival of the peak season for the beverages industry, Varun Beverages is a good consumption stock to watch out for at present. However, as it is a capital intensive business, the current pandemic can put a strain on the Balance Sheet which is already laden with debt. The valuation at current levels does not give any margin of safety at the moment.
VIP has been the market leader in the soft and hard luggage segment in India for a long time now. The company is one of the biggest luggage manufacturers in the world by volume. However, the company and the industry have been facing tough times with sales contraction due to a fall in demand and disruption from COVID-19. The company is doing well to switch to Bangladesh for soft luggage procurement and to reduce costs while acknowledging that the sales environment going forward will be tough in the short term. It has also ventured into PPE making and is focusing on increasing its ladies’ handbags lines. As per the management, the demand scenario at the moment is very uncertain. It remains to be seen how fast demand comes back to the sector and how will the company fare in the meantime. Given the slowdown in travel and travel activities at the moment, demand-revival seems a distance away. Nonetheless, given the company’s strong brand image and leadership position in the industry along with the resilient balance sheet of the company, VIP industries remains a pivotal mid-cap stock to watch out for.
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