When the results season comes around, the hype cycle kicks in for headline writers. Drawing eyeballs means talking about that company that delivered profits of 100X over the previous year. But rather than the outliers that are growing on a low base, true value, I would argue, lies in the reasonably sized players that are beating their industries, and growing their topline revenue and bottomline profit faster than their peers.
Industry outperformers are a shortcut to identifying companies that have a unique DNA, since these businesses are proving that they can overcome the forces limiting their competitors.
Out of the companies that announced results this quarter, we identified ten winners that are outperforming, and taking market share from their peers.
Indian IT: Companies targeting enterprise cloud and AI budgets are winning
The IT sector saw average revenue growth at a modest 15.3%. The big bumper years of the early 2000s for software services, look long gone. But even as the easy money has ended, some software players have delivered double digit outperformance by targeting enterprise cloud and AI migration efforts. Top banking companies globally are busy migrating their legacy core systems to cloud-native SaaS, and Oracle Financial Services grew sharply in this space from software licensing.
Coforge was another winner this quarter. The company landed large deals in travel, healthcare and finance. Their executable order book reached a record $2.2 billion, with strong margins.
Another winning theme is in domestic infrastructure. India's massive power grid investments, and its domestic electronics manufacturing effort are creating compounding growth stories.
Hitachi Energy is riding on India's once in a lifetime power sector opportunity. For Hitachi, India's ambitious power grid and power infrastructure buildout has created a record Rs. 29.500 crore order backlog.
The much talked about electronics story has two winners this year. Dixon Technologies gained mobile market share despite industry-wide handset volume slowdowns. It is also accelerating backward integration into display and camera modules.
And Syrma SGS has outpaced the electrical manufacturing industry through high-margin ODM (Original Design Manufacturing) export contracts in EV electronics and medical devices.
A margin recovery in chemicals, for two players
Capex spending has been the dominant story for chemicals players over the last few years, as they invested heavily in new plant capacity. Now, the management of Deepak Nitrite and Aarti Industries both noted that this is paying off in commercial production. The long game has helped both thes companies: while the broader chemical sector struggled with low global pricing and inventory destocking, and industry average profits were down -7.6%, these market leaders leveraged integration to deliver massive profit turnarounds.
Deepak Nitrite has been winning market share domestically, while Aarti Industries has landed multi year global contracts in nitric acid and benzene derivatives.
Young, rapidly growing markets are boosting JioFin, MCX and Ather
Jio Financial Services is rolling out digital consumer lending and merchant financing at a rapid clip, to take advantage of the capital hungry Indian consumer and entrepreneur. Commodities exchange MCX got a boost from a client base that doubled year on year, and rising transaction fee revenues.
The last company on the list is the new kid on the block, Ather Energy. The company is drawing a lot of attention as it surpassed two-wheeler industry growth by locking in market share in the premium EV segment. The company is a sharp contrast to Ola Electric in its focus on execution. It has been expanding its distribution hubs, and localizing battery pack manufacturing as it works to cement its market share gains.
The performance of these kinds of players validate investors who like to bet on individual businesses rather than on a buzzy industry space. Whether it is electric vehicles, electronics assembly, or relatively old school spaces like chemicals, management quality, strategic pivots and the good old approach of building the client book, never go out of fashion.
