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MUMBAI : Revenge travel and soaring demand for cars, hotel rooms, new homes and printing and stationery items have spurred the biggest expansion in Ebitda margins for five out of 75 sectors in the fiscal first quarter despite rising or steadily-elevated input costs, showed a Mint study of Capitaline data.
Earnings before interest, taxes, depreciation and amortization (Ebitda) margin expanded the most in air transport, hotels, realty, auto and printing and stationery sectors in the quarter ended June (Q1FY23) with most companies in these sectors having issued their quarterly earnings. These five sectors, which can be broadly classified as consumer discretionary theme, have benefited from robust consumer demand despite an increase in input costs as a percentage of net sales. To be sure, demand was badly affected by the second wave of the pandemic in the same period last year.
For instance, despite airlines facing escalated fuel costs—the ATF (aviation turbine fuel) index in WPI rose to 205.7 by June-end 2022 from 96.90 at the end of Q1FY22—Ebitda as a percentage of net sales jumped to 5.9% from a negative 41.6% a year ago. The realty sector, similarly, saw input costs as a percentage of net sales jump to 14.1% from 6.4% a year ago, yet Ebitda margin expanded to 34.5% from 29.4% a year ago .
Sectors where input costs played a key role in compressing Ebitda margins the most were steel, cement and textiles. In steel, input costs as a percentage of net sales rose to 56.8% from 41.6% in Q1, causing Ebitda margin to contract to 17.7% from 28% a year earlier. In the textile sector, input costs rose to 57.2% in Q1 from 54.9% a year ago, dragging down the Ebitda margin to 11.2% from 18.8% a year ago . “As the economy opens up post the covid shock, we are seeing revenge tourism," said Jyotivardhan Jaipuria, founder and chief executive officer at investment firm Valentis Advisors. “This is helping sales and occupancies in sectors like hotels. With high fixed costs, we see operating leverage continue to play out here as occupancies rise."