Earnings recovery? Performance of over 3,000 firms reveals double-digit sales growth

Care Ratings

The performance of 3,225 companies in Q1 FY19 over the last year (Q1 FY18) reveals an improved performance picture, with net sales registering a double-digit growth during the quarter over Q1 FY18 performance.

Also, after declining by 9.7 percent on a Y-o-Y basis in Q1 FY18, net profits witnessed a growth of about 8.6 percent Y-o-Y in Q1 FY19. The net profit margin witnessed marginal contraction of about 30 basis points Y-o-Y during the quarter.

Usually, the overall performance gets skewed to an extent due to the performance of banks which are guided by other exogenous factors.

Banks have been affected by NPA recognition and provisioning which finally affects profits while finance companies, by virtue of their operations, are distinct from other services segments.

In Q1 FY19, after excluding the banks and finance companies, the performance of industry (2,698 companies) depicts an almost similar trend to that of the aggregate sample in terms of sales.

However, in terms of profits, the aggregate performance of companies witnessed a sharp improvement and increased by 32 percent Y-o-Y vis-à-vis a decline of 12.3 percent registered in Q1 FY18.

For the aggregate sample, (Table 1), net profit margin remained positive but witnessed a slower growth during the quarter. While after excluding banks and finance companies, the net profit margins improved marginally by about 100 basis points in Q1 FY19 (Table 2).

As can be seen, the Indian economy has been picking momentum leaving behind the demonetization and GST implementation impact that did impact industry performance between Q3 FY17 and Q2 FY18

Image 1

For the aggregate sample of 3,225 companies, sales registered a stable growth of 12.8 percent on a Y-o-Y basis.

a) Net profits have registered a growth of about 8.6 percent compared with a decline witnessed during the corresponding period last year.

b) Net profit margins witnessed marginal contraction of about 30 basis points during the quarter

Image 2

a) Excluding banks and finance companies, net sales grew at a slower rate of 13.2 percent Y-o-Y compared with 14.1 percent Y-o-Y during the same period last year.

b) Net profits witnessed a double-digit growth of 32 percent Y-o-Y to Rs 101,711 crore in Q1 FY19 from Rs 77,080 crore in Q1 FY18

c) Profit margins witnessed an expansion of 100 basis points when compared to Q1 FY18

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