This is the 7th 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.
Balkrishna witnessed a great Q3 with continued momentum from Q2. It has also hiked its volume guidance for FY21 due to a continuous rise in sales. BKT has also announced a capex plan for Rs 1900 Cr for expansion of the Bhuj plant, expansion of carbon black capacity, and modernization of existing plants. These projects are expected to be completed by H2FY23 and are necessary to maintain momentum and stay competitive according to management. It remains to be seen whether there are any other RM shocks to come for BKT and how the company’s plans for the new capex pans out. Nonetheless, given the company’s sustained margin performance, its resilient market share in a slow global market, and the rapid rise of the company in India, Balkrishna Industries is a good tire stock to watch out for.
Divi’s had another good quarter in Q3 and maintained its growth momentum in 9M with 27% revenue growth and 50% PAT growth. The management is doing well to explore and develop new avenues like contrast media APIs and in overall efficiency through initiatives like green chemistry. It remains to be seen how the company will be able to chart its path in the future by solely relying on its core areas of API and Custom Synthesis while everyone else is diversifying into as many emerging segments as they can and whether the rise in gross margins in last 9 months can be sustained going forward. Nonetheless, given the company’s history of excellent performance and its standing in the global API industry, Divi’s Laboratories remain a pivotal pharma stock in India, especially given the massive China substitution opportunity.
Eicher saw impressive industry outperformance in both the RE and VECV businesses and its highest ever revenue from operations for a quarter. The company has seen a good response to the MiY platform and the Meteor which has seen overwhelmingly good response. The demand for the Meteor is so high that around 35-40% of new bookings are for the model and wait times are as long as 4 months. The company still faces major challenges plaguing the industry like RM cost inflation and the electronic components shortage. It remains to be seen how long the company will be able to keep outperforming the industry and how its various initiatives like studio stores and Make Your Own platforms pan out in the future. Nonetheless, given its resilient performance in its various segments and the strong brand and industry position of the company, Eicher Motors remains a critical stock to watch out for every auto sector investor.
Galaxy has done well to achieve good revenue & profit growth in Q3 and has managed to increase EBITDA/ton due to increased utilization and launch of new products. The company saw revenue growth despite modest volume growth mainly due to the continued rise in fatty alcohol prices and rising demand for specialty products. The company has seen good growth coming from India as demand comeback was strong for all tiers of customers. The company is expecting sustained demand for its products going forward due to the renewed focus on health & hygiene and the new products of nontoxic preservatives and mild surfactants. The only credible concerns for the company are RM inflation and supply chain issues arising from the ongoing container shortage. It remains to be seen how the whole container situation will pan out going forward and whether the focus on health and hygiene is going to stay or not post COVID. Nonetheless, given the company’s robust product portfolio and the ever-increasing list of both FMCG majors and niche specialty product makers, Galaxy Surfactants remains a good stock to watch out for in the specialty chemicals space.
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