- High input costs during the quarter impacted corporate profitability.
- While many sectors showed moderate growth in the last quarter, analysts believe banks have outperformed other sectors.
- FMCG companies delivered healthy earnings reports in the last quarter, but are wary of an inflationary environment.
Corporate India’s performance in the September quarter was healthy, based on the 386 companies that have already released their results.
“The quarterly financial results show that net sales continue to grow at a robust double-digit pace of 22.9% in Q2FY23 from 22.3% in Q2FY22,” said Bank of Baroda economist Dipanwita Mazumdar.
As in previous quarters, higher raw material costs remain a drag. However, the increase in raw material prices led to high input costs that impacted the profitability of companies.
“There seems to be divergence in terms of profitability. Higher input costs impacted the PAT numbers, which showed a moderation in growth to 8.5% in Q2FY23 from 21.1% in Q1FY22 and pre-pandemic growth of 27.9% (supported by softer input prices at that time). moment),” said Mazumdar.
While many sector companies posted moderate growth in the last quarter, analysts believe banks outperformed them with better results.
“Sectorally, banks seemed to have performed better. Banks showed double-digit PAT growth of 41.6% in Q2FY23 from 35.3% in Q2FY22, supported by higher interest income in the rising interest rate cycle,” said Mazumdar.
Recently, ICICI Bank reported a 26.5% year-on-year increase in its NII to 14,787 crore, its peers HDFC Bank reported an 18.9% increase to ₹21,021 crore, while Axis Bank recorded a 31% increase to 21,021 crore during the period. ₹10,360 crore reported.
She added that FMCG company net sales remained strong, growing 19.3% in Q2FY23 compared to 12.1% in Q2FY22.
While most FMCG companies delivered healthy earnings reports in the September quarter, companies remain wary of an inflationary environment.
Recently, in its September quarterly results, HUL said it remains cautious on inflation affecting the demand environment and says it is “cautiously optimistic in the near term.”
For auto companies, Mazumdar believes, “While net sales have shown some moderation, it still maintained double-digit growth of 20.3% compared to 32.8% in Q2FY22.”
However, she stressed that the revelry failed to improve the consumer durables segment, where net sales rose just 0.7% in Q223, compared to 35% in the same period last year.
Corporate earnings report for the second quarter
|Sep-20||Sep 21||Sep 22|
|YoY Growth, %||-1.4%||22.3%||22.9%|
|YoY Growth, %||27.9%||21.1%||8.5%|
Source: Ace Equity, bank of Baroda Research
Stock markets applaud gains
Meanwhile, Indian stock markets have also performed quite well as Sensex is up more than 4% in the past month amid good corporate earnings and despite weak global signals.
“Markets have so far managed to put on a good show amid the mixed global signals, but we are seeing limited participation. It is the banking industry that leads the way, while others play a supporting role in between. The broader indices are also showing a mixed trend at the moment. Overall, we believe the market tone remains positive, but the focus should remain on stock selection and risk management,” said Ajit Mishra, VP of Research at Religare Broking.
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