The Earnings season has kicked off on a modest note, with the profit numbers from early birds showing a slower yearly increase in Q3FY24 than in recent quarters. Shorn of banks and financials, net sales have risen just 4.5% year-on-year and net profits just 7.3% y-o-y for a sample of 107 companies. This is despite a 109 bps fall in input costs and a 22% y-o-y jump in other income.Consumer-oriented businesses are clearly seeing weaker demand for their products, especially in rural markets. Moreover, competitive intensity remains high.
At Hindustan Unilever, which tuned in poor numbers, volumes grew by just 2% y-o-y while revenues were flat. At Asian Paints, the 5.5% value growth in domestic decorative paints is muted in the context of the late festive season. Analysts highlight the poorer product mix at some companies due to down-trading by buyers.This seems to be impacting not just sales but also margins.Retailer Avenue Supermarts reported a lacklustre set of numbers as non-FMCG sales were disappointing. The company missed Ebitda (earnings before interest, tax, depreciation and amortisation) estimates as costs increased more than expected; while the gross margin was flat y-o-y, the operating profit margin slipped 9 bps. Metro Brands reported weak revenue growth of 6% y-o-y, missing estimates amidst a soft demand and pricing environment and a 10% fall in same-store sales.
Cement major Ultratech’s operating performance was in line with estimates, but the company missed bottomline estimates as interest costs were higher while other income was lower than expected. Cement prices, saw some improvement in Q3FY24 but corrected to a large extent by the end of December as demand tapered off. The IT pack has fared reasonably well in a tough environment. The demand outlook is improving, though when discretionary spends by clients will recover meaningfully is still unclear. Revenue growth at TCS, in constant currency terms, was 1% quarter-on-quarter, driven by BSNL’s ramp-up. The company’s productivity improved and it managed to rein in costs, which helped margins improve by 70 bps sequentially, more than expected. Infosys, on the other hand, reported a revenue decline of 1% in constant currency terms, though this was better than estimates.
The software major narrowed the guidance band to 1.5-2.0% growth from the earlier 1.0-2.5%. The Ebit (earnings before interest and tax) margin showed a fall of 70 bps q-o-q. Reliance Industries’ consolidated revenues were up just 4% y-o-y, missing estimates; while the O2C business saw modest numbers, the telecom and retail businesses did well. Higher provisions and a weak operating profit growth marred HDFC Bank’s reported results. Analysts worry the profit growth drivers appear to be less sustainable. For a sample of 147 companies (including banks and financials) net profits were up 17% y-o-y on the back of a near 15% y-o-y growth in the top line. A smaller increase in expenses helped boost operating profit margins by about 70 basis points y-o-y. In particular, a fall in input costs helped boost the operating profit; raw materials to net sales dropped by 324 basis points y-o-y.