February 1, 2021 1:08:38 am
It has been a very good earnings season so far with mostly surprises. Virtually every IT player has turned in stellar numbers and most companies catering for the home market too have reported a smart rebound in revenues driven both by better volumes and higher prices.
The strong order inflows at Larsen &Toubro are encouraging, though it would be too soon to call a turn in the capex cycle.
Rising raw material costs benefitted producers; Vedanta reported the best profits in 11 quarters on better volumes and higher prices while the pick-up in local demand and sharp rise in prices helped JSW Steel post record steel margins.
With supply chains restored, consumption demand was reasonably strong through the festive and wedding seasons. Revenues at TVS Motors, for instance, were up a smart 31 per cent year-on-year, led by a 20 per cent y-o-y rise in volumes and an 8.5 per cent y-o-y jump in average selling prices.
Again, volumes at Asian Paints jumped an astonishing 33 per cent y-o-y, pushing up revenues by nearly 27 per cent y-o-y on the back of both pent-up and festive demand. Sun Pharma’s sales rose 9.2 per cent y-o-y, led by the US market, which went up by 11 per cent y-o-y.
At Ultratech, volumes were up 14 per cent y-o-y on the back of demand from rural and urban housing and government-led infrastructure. Despite an adverse base, Dabur notched up a volume growth of 18.1 per cent y-o-y driving up sales by 16 per cent y-o-y. Pidilite reported a 19.3 per cent rise in consolidated sales.
For a sample of 444 companies (excluding banks and financials), revenues for Q3FY21 were down about 2 per cent y-o-y, but that’s because Reliance Industries reported a 22 per cent y-o-y fall in sales. The combination of better revenues and contained costs led to a huge 500-basis point expansion in operating profit margins (OPM). At Tata Motors, the Indian business posted an expansion of 570 bps in the OPM. At Sun Pharma, EBITDA margins expanded 550 bps y-o-y, partly on the back of a sharp 520 bps y-o-y drop in other expenditure. At Pidilite, gross margins expanded 100 bps y-o-y while ebitda margins expanded 380 bps y-o-y due to lower employee expenses and smaller other expenses. FE
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