This is the 5th 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.
The performance of the quarter was good with recovery back to Q3FY20 levels in both sales and volumes. The demand for components has been steadily rising and the company is also looking to supply components for other consumer electronics like washing machines and refrigerators. The management has clearly outlined how the company plans to take the opportunities arising from the import ban on finished goods. It remains to be seen how the industry demand will be affected by the rise in RM costs and whether the company will be able to achieve its optimistic expectations in the exports and components space. Nonetheless, given the massive opportunity size from import substitution, the growth prospects of the industry, and the company’s dominant position in the ODM market, Amber Enterprises remains a pivotal stock in the fast-rising air conditioning industry. However, the current valuation appears to be very stretched for the company.
Dixon had a phenomenal quarter with revenues and profits doubling from last year. Demand has come back fast in all of its segments and the company has already acquired Motorola and Nokia as customers for mobile phones whose volumes should help Dixon reach the volume ceiling for the PLI scheme easily. Despite the issues of components shortage for the TV industry, Dixon is confident of being able to complete its commitments without many hiccups. It remains to be seen whether the company will be able to expand aggressively as it has done in the recent past and what obstacles it will face that may threaten to halt its growth momentum in its emerging segments. Nonetheless, given the list of marquee customers that the company has gained and retained over the years and its continuous efforts to expand existing capacities like consumer electronics and adding new product lines like disruptive medical devices, Dixon Technologies is cementing its place as a good growth-story in the outsourced manufacturing sector in India.
VGL has had another blockbuster quarter with revenue growth of 29% & profit growth of 45% in Q3. It has also seen its unique user base expand 33% YoY to 4.7 lac. The company is also looking to slowly establishing its presence in the digital medium especially in the social media and influencer space as conversions from these are 100%. VGL is also looking to capitalize on its target demographic of adults aged above 40 and address the gap of fashion and apparel in this age group. 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, and also compete with e-commerce giants like Amazon and Walmart in the web space. 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.
Wonderla Holidays Ltd
The quarter was subdued for Wonderla mainly due to the selective opening and the visitor caps imposed on the parks. The business for the first half of the year was fully impacted by nil operating revenue from park operations. In the meantime, the company has focused on cost-cutting measures and getting expanding the open days of the week. It has also put all expansion plans on hold and is focusing solely on improving existing park operations to their previous levels. The company now has 3 parks open in Bangalore, Hyderabad and Kochi and needs 1300 visitors per day per park to breakeven. It remains to be seen how much time it will take for normalcy to come back in their business. However, Wonderla has the resilience of the balance sheet to survive through these tough times and also the potential to positively surprise once all the parks are opened and the footfall comes to pre-COVID level.
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