- 03 Sept 2024
- 8 mins read
- By: BlinkX Research Team
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Q4FY23 Results – not done, but substantially done
Normally, the annual results for March can be filed by the end of May, while quarterly numbers have to generally filed within 45 days. There is a little over a week to go for the full set of results for Indian companies to be out. As of date, out of the 4,200 listed companies on the BSE, over 1,600 companies have announced their results. However, if you combine the Nifty 50 and the Nifty Next 50, more than 95% of the companies have announced numbers. If you look at in terms of market cap of the BSE and NSE overall, nearly 80% of the market is already covered, so in value terms the results should be representative.
Table of Contents
- Q4FY23 Results – not done, but substantially done
- First, a look at the big picture for Q4FY23
- Sector show Q4FY23 – first the bad news
- Sector show Q4FY23 – then the good news
- What is the moral of the Q4FY23 story?
First, a look at the big picture for Q4FY23
It is always best to begin with the macro picture. Here are some of the macro highlights for the March 2023 quarter.
- Let us first talk about the revenue growth in the quarter for the universe of 1,500 companies that have announced results so far. Overall revenues were up 13.7% yoy led by higher volumes, better pricing, and improved rural sales. Even sequential sales revenues were up 3.8%.
- The profit boost in Q4FY23 came from the surge in gross profits for the quarter. Gross profits for the quarter were up 16.9% yoy and 21.6% sequentially. This was on account of a sharp fall in input prices in the quarter. As a result, net profits for the quarter overall were up 18.2% yoy and 26.4%.
- More importantly, at a macro level, this led to an expansion in margins. Here is how. Gross margins were 30 bps up from 11.5% to 11.8% while net margins were up 40 bps from 11.2% to 11.6%. However, on a sequential basis, gross margins improved 170 bps while net margins were up by 210 bps.
Sector show Q4FY23 – first the bad news
In any quarter, there are bound to be some sectors that underperform and there were a number of sectors underperforming in the current quarter also. Here are some sectors that did not live up to expectations, or were hit by structural issues.
- The IT sector saw revenues up by 18.6% but the net profits were lower by -5.7%. Lower tech spending and weaker pricing power led to lower profits for IT companies. Amid improving attrition situation, operating margins stayed under pressure.
- Textiles faced pressure due to dwindling exports. Overall sales were down -11.9% and profits were down -49%. This sector was hit badly by the global demand slowdown. Higher input costs added to the pressure on profits in the quarter. Like textiles, another export driven industry, Chemicals also disappointed.
- Healthcare came under pressure in the quarter with revenues growing 8.9% yoy but net profits down -24% yoy. The was largely on account of discontinuation of COVID related revenue streams for this sector
Essentially, it was the export trade driven sector that saw pressure on profits and also on the top line.
Sector show Q4FY23 – then the good news
There were a number of stars in the quarter across financials, capital goods and FMCG related stocks. Here is a quick summary. That was the good news for the quarter.
- Banks were the undoubted stars of the fourth quarter with 31.9% yoy revenue growth and 26.7% yoy net profit growth. Banks were given a helping hand by sharply higher net interest incomes (NII) and widening of net interest margins (NIM).
- Capital goods had a good quarter with top-line revenues growing 17% and bottom line growing by a healthy 22%. The top line was helped largely by a surge in the order book positions, while lower input costs helped the growth in profits in the quarter.
- FMCG also turned out to be a surprise pack. The sector saw sales grow by 8% in the quarter yoy while the net profits grew 18.4%. There were several factors in this better than expected performance by the sector. Lower crude costs, higher rural sales, and lower cost of agri inputs helped these companies perform better. Food vertical thrived.
- Oil & gas stocks also stood out in the quarter. While top line was not all that flattering due to weak crude prices, it was the bottom line that grew by 43.8%. For downstream oil companies, it was about a low base and improved gross refining margins (GRMs) supported by substantially better marketing margins during the quarter.
Apart from these four heavyweight sectors, there were also other sectors that did very well. For instance, the contact intensive sectors like aviation and hotels did very well. However, this was on the back of a very low base, so the growth does look magnified. There was revenge consumption in most of these contact-intensive sectors.
What is the moral of the Q4FY23 story?
Overall, the hits were more than the misses in Q4FY23, and in terms of market cap weight, it was only the IT sector that has done below par in the fourth quarter. But, the real summary of the quarter is in the gross profit and the net profit performance. While the growth is visible on a yoy basis, the real growth is seen on a sequential basis. That is what has made this quarter better; and a source of optimism too. Overall, it has been a positive quarter for Indian corporates, notwithstanding the headwinds. Input costs have come down, rural sales have picked up, the capex cycle is looking up and interest costs and solvency risks are topping out. That is surely a good position to be in.
Content Source: Money Control and BSE Filings