From next week onwards, India Inc will start declaring its financial results for the March 2022 quarter. Almost half of the quarter witnessed the ongoing Russia-Ukraine war, which has caused global supply chain disruptions and led to a rise in input costs for companies.
YES Securities in a report expects India Inc’s overall revenue growth of 19 per cent (excluding financials and oil marketing companies), primarily driven by oil and gas, chemical and information technology. “Adjusted PAT (profit after tax) is likely to grow by 32 per cent y-o-y, largely driven by strong performance from banks.”
Automobiles Sector
It said the sector is expected to see a steep contraction of 50 per cent, hampered by both supply-side issues and rising input costs.
Financials Sector
“For financials, NII growth is likely to be the strongest in the past eight quarters, as credit offtake picked up during the festive season.” It added that the operational performance of financials is likely to remain flat on a year-on-year basis, translating into a meager 4 per cent growth despite a favourable base. PAT for financials will grow at a staggering 40 per cent.
Banking Sector
The report said, “Sequential loan growth would be reasonably healthy in the fourth quarter of 2021-22, as retail disbursement would have picked up following a relatively unimpactful third wave of COVID-19.”
Fresh slippages in the March 2022 quarter will generally be stable to lower on a sequential basis for banks. Some incipient underlying stress may have formed due to the third wave of COVID-19 and due to the disruption caused by the Russia-Ukraine war, it said.
Capital Goods Sector
YES Securities expects 4Q to be healthy for the sector, reporting revenue growth of 12 per cent, as capacity utilisation levels ramp up, owing to a pick-up in economic activities, capital expenditure (capex) outlay from the government as well as private sector continues and supply-side bottlenecks being addressed.
“We expect project companies to report revenue growth of 12 per cent led by sharp pick up in execution of its order book and labour availability reaching pre-COVID-19 levels,” it added.
Consumer Durables Sector
For the consumer durables sector, it said gross margins are expected to remain under pressure, as commodity prices continue to remain at elevated levels and companies are unable to fully pass on the increased input prices. “We expect strong Q1FY23 for the cooling product companies given the prediction of a harsh summer and uninterrupted summer season sales after two years.”
IT Industry
The IT industry’s performance in the March 2022 quarter would be slightly impacted due to the lower number of days in the quarter. Attrition has almost peaked for most IT companies and should stabilise and come down going ahead. Earnings before interest and tax (EBIT) margin performance is expected to be flattish (+/-20 bps) quarter-on-quarter for most companies.
Infrastructure Sector
The infrastructure sector is expected to report a revenue de-growth of 3 per cent year-on-year (average) as against 18 per cent in 4QFY21 despite the fourth quarter being the strongest executional quarter, owing to a higher base and delay in receiving appointed dates for their HAM (hybrid annuity model) portfolio.
“On the margins front, owing to a steep rise in commodity prices and change in revenue mix, we expect Ebitda margins to remain under pressure. Adjusted PAT is expected to remain muted due to rising finance costs and subdued topline performance,” the report said.
Pharma Sector
For the pharma and healthcare sector, the March 2022 quarter will be a quarter where input costs and gross margin trajectory would be in focus as an early plateau in costs like freight, solvents, other key materials from China that were seen in Jan/early-Feb reversed course during the quarter.
Energy & Chemicals Industries
The report said, “We expect earnings to improve QoQ and YoY for upstream (ONGC, OINL) on higher crude. Refiners, on the other hand, are expected to benefit from a strong improvement in refining cracks, especially in March 2022 when MS and HSD cracks hit decadal highs. In addition, the likelihood of inventory gains would also aid earnings for refiners.”
Among gas utilities, city gas distribution companies could report q-o-q improvement in earnings on account of revision in CNG & PNG prices and cap on gas sales, thereby limiting dependence on expensive LNG.
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