- Wealth PMS (50L+)
Kotak Bank is topping the leaderboard with a 3.2% weekly gain. The financials as a sector are in uptrend from last one year on the back raising interest rates.
Coal India was down -9.4% this week. The results were decent. But the stock had already seen a huge run-up before the results.
Nifty 50 index inched marginally down -0.3% in the previous week. On monthly basis, Nifty is up 4.5%. Yet, on the yearly time frame, it does worse than gold. Crude went below $90 while silver closed flat and gold is up 1.1%.
On valuations, the price-to-earnings (PE) ratio for the Sensex was at 23.3, and there’s a graph below for historical comparison.
Capitalmind Outliers is our in-house screening tool that helps you discover stocks with trends and momentum in their favour. Every week, we at Capitalmind discuss what’s behind an outlier standing out. This week, we’re looking at Indore-based packaged foods company which goes by Prataap Snacks, a leader in the rings category of snacks.
PSL sells potato chips, extruded snacks, and pellets under flagship brand “Yellow Diamond”, namkeens and fryums under recently acquired regional brand “Avadh” (fourth-largest in Gujarat), and sweet snacks under “Rich Feast” via its decent-sized distribution network that covers 2.2 million retail outlets.
The company had an unsustainable growth run in the early years of the past decades, driven by offering value products–higher grammage per pack, typically in lower price categories– but appears to have moved on as recent inflationary trends tore apart cost structures, and pandemic induced lockdowns interrupted demand for its products. To be sure, the company did well to build brand loyalty and increase its market share in western snacks to 6.8% during its growth years, but its continuance does not seem as certain.
Thus, the post-pandemic era has been one of soul-searching for management. Mindful of its challenges ahead, the company has made serious changes to its business model last year with a higher focus on namkeen as a category, higher priced SKUs, grammage rationalizations, and a shift to a two-tier distribution model paring down a band of trade margins. The overarching idea, in their own words, seems to be: moving from being a brand in impulse purchase category to planned purchase category.
Fair enough, considering the deterioration in the company’s margin and return profiles, especially given they don’t stack well against some its listed competitors:
Will it work? Too early to say, but the numbers from the recent quarter appear to be a mixed-bag: the growth visibility came back, but the margin profile, may take some more time.
Prataap Snacks is one of many stocks that ranked well on the Capitalmind Outliers platform this week–subscribe to our premium offerings to access Capitalmind Outliers.
(Disclaimer: The information conveyed in this post is intended for informational purposes and shouldn’t be considered as investment advice. Please do your own research before making investment decisions)
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