The impact of coronavirus carnage on Radhakishan Damani’s portfolio

Avenue Supermarts runs a chain of hypermarkets under the name of Dmart. It offers basic home and personal use products, groceries, home appliances, garments and more. The share price has lost more than half the rally this year so far due to coronavirus impact and yet, it has added 14% to the investors’ wealth.

Consumer confidence in India is at a 5-year low but DMart posted a strong set of earnings in the latest quarter with a 24% growth in revenue between October and December 2019. However, given the deteriorating economic conditions, and rising competition, Morgan Stanley had predicted that DMart will have to slash prices further to retain market share.

Coronavirus threatens to impact DMart’s supply chain, which could lead to shortage of products in its stores in the near future. However, given its position as one of the top players, it may be better placed to fend off the crisis compared to most of its peers, and that is what makes it the market’s favourite stock — as well as the one of the world’s most-valued retail stocks.

Delta Corp is the largest gaming company in India and runs most of the offshore gaming casinos off of Goa. In addition to traditional casinos, Delta also offers online and electronic casino gaming experiences. Hospitality services further compliment Delta’s gaming services.

However, increasing competition and a general slowdown in the market have resulted in Delta Corp losing more than half its value in 2020.

Online gaming has picked up steam in the last one year, and Delta Corp has capitalized on this new opportunity to report a healthy growth of 17% between October and December 2019, when compared to the same period in 2018.

On the other hand, Delta’s casino business is facing headwinds in the form of increased competition and a general slowdown in the market, according to a report by Motilal Oswal.

The coronavirus scare also threatens to have a major impact on Delta’s business, especially now that the Indian government has banned all non-essential travel to India.

Simplex Infrastructures is known for constructing thermal power plants, bridges, railways, roadways and more. Founded in 1924, Simplex Infrastructures has partnered with Indian Railways to set up most of the metro and light railway projects in Mumbai, Delhi, Kolkata and Bengaluru.

However, despite its vast experience, Simplex seems to be finding it tough in 2020. Its share price has rallied thrice this year to reach ₹61, only to lose steam and slide down to sub-₹30 levels.

Simplex’s performance worsened during the October to December 2020 period. Its revenues fell by 40% and raw material consumption fell by almost half. According to a recent report by Edelweiss Research, Simplex’s performance was weak due to liquidity issues.

Due to this, banks have started classifying Simplex’s account as a non-performing asset (NPA). This could further worsen Simplex’s ability to raise funds.

The India Cements is a leading cement manufacturing company. It has eight plants in four states and has two cement grinding units as well. It was established in 1946. Its share price increased by nearly 50% in 2020 when compared to the price on December 31, 2019, but it has since lost half of its gains. As of market close on March 13, 2020, India Cements has recorded a healthy increase of 22% in its share price.

According to a report by JM Financial, the cement industry has reported marginal growth in the October to December 2019 period. This is in part due to weak economic activity and a slowdown in government’s infrastructure projects.

An increase in cement prices in South India also led to a decline in demand. As a result, the return on capital employed fell by nearly 30% when compared to three years ago.

To counter weak demand in the south, India Cements is setting up a new plant in Madhya Pradesh at an investment of ₹1,400 crore to exploit the growing demand in this region.

VST Industries is a tobacco company that manufactures and distributes cigarettes. Headquartered in Hyderabad, VST has been slowly and steadily gaining market share from the industry leader ITC. This has reflected in its financial performance, too - VST’s revenue increased at a healthy rate of 17.3%.

However, VST’s stable performance has not reflected in its share price. In 2020 so far, VST has lost 14% in market capitalisation.

According to the latest earnings report filed by VST, net profit has increased by 47% in October to December 2019, when compared to the same period in 2018. An ICICI Direct report states that this is in part due to a stable tax regime as well as an improved product mix that offers more affordable options.

VST’s favourable product mix has also helped it record more than double the growth in terms of volume when compared to the industry average - VST’s volumes have increased by 10% while the industry average is around 4%.

Foods & Inns manufactures and exports tropical fruit pulps, canned, frozen and other related products. It exports 70% of its products to Europe and Japan, and the remaining is sold in the Middle East and Indian markets. After recording an increase of nearly 27% in its share price this year, Foods & Inns has declined by 14%.

Foods & Inns has registered a decrease in its revenue in the October to December 2019 period, when compared to the same time last year. In addition to this, its net profits have declined by almost 98%.

To improve its earnings, research firm KK Securities has recommended a plan of action that involves using solar energy and new processing facilities.

Apart from this, Foods & Inns is evaluating selling its products to end customers directly. This would open up a major new market for the company.

Note: As of December 31, 2019, there were no mutual funds invested in Foods & Inns.

Spencer’s Retail runs a chain of convenience stores and hypermarkets in 160 stores in 35 cities across India. It sells apparel, fashion, electronics and other items. Despite consumer confidence being at a low of nearly five years, Spencer’s Retail’s share price has increased by 21% this year.

The last one year has been a bit sobering for Spencer’s Retail. Just like its competitors, Spencer’s share price fell by nearly three times over the last 12 months.

Falling consumer confidence has also led to Spencer’s returning a loss in the October to December 2019 period, even though its sales increased by almost 6% when compared to the same period last year.