Despite some instances of disappointment, the October-December earning season has mostly been on track so far. Results declared by major companies, so far, show some signs of a moderate economic recovery. Some improvement is also because of the base effect as the same period last year witnessed demonetisation. A key challenge is rise in input prices, though consumer demand is on an uptick. The management commentary from the country’s largest engineering and construction firm, Larsen & Toubro, which beat estimates on almost all fronts, was most encouraging. The company said the quarter was a satisfactory one and fresh orders won by it were up 38%, which was a welcome relief from the previous two quarters where the outcome was not proportionate to the effort put in by the firm to win the orders.
However, the company has not revised its guidance for the year. It had in November 2017 cut its order inflow guidance for the full year ending March 2018 and expects to close the fiscal with only a nominal increase over last year’s numbers. L&T posted a decent 11% year-on-year (y-o-y) growth in its infrastructure revenues, with domestic infrastructure growth scaling a six-quarter high of 20%. Private capex continues to be sluggish and order inflow continues to be mostly from public sector firms.
Aluminium major Hindalco also witnessed rise in demand, taking its y-o-y net profit growth to 18%. If it was below market expectations, it was because of certain provisioning on account of the Supreme Court’s order on mining regulations. On the back of the rise in prices of aluminium and copper on the London Metal Exchange, the company’s revenues increased by 18%. Ebitda growth was up 36% y-o-y. For the country’s second largest commercial vehicle manufacturer, Ashok Leyland, ebitda margin expanded by 100 bps quarter-on-quarter to 11.1%, which was in line with estimates. The company was able to offset the impact of higher discounts through better mix and price hikes.
The management expects volume momentum in medium and heavy commercial vehicles (M&HCVs) to sustain. The company’s focus remains on segments such as light commercial vehicles, exports, defence and spares, with an objective to de-risk from the cyclicality of domestic MHCVs. Two-wheeler manufacturer, TVS Motor, also reported a decent set of numbers. Its ebitda of Rs 290 crore was up 31% y-o-y and above estimates due to higher-than-expected realisation, and ebitda margin at 7.8% was led by cost reduction and better product mix. However, rising input costs remain a concern. The management said that rural demand is picking up.
Though Bajaj Auto reported a lower-than-expected growth in its net profit, which grew 3% y-o-y to Rs 952.44 crore, it rose for the first time in five quarters. Revenues rose 25.7% y-o-y, which was above estimates. The company’s sales during the quarter rose 6% y-o-y to 33 lakh units on the back of a 16% jump in exports. However, domestic sales remained flat at 19 lakh units. Ebitda rose 18% to Rs 1,231 crore, while operating margin contracted 619 basis points to 19.3%. The company faces challenges due to rising input costs.