The earnings season has got off to a modest start with most companies and banks reporting results in line with expectations. Among the 93 early birds, only Bajaj Auto has beaten estimates while Hindustan Unilever has been a big disappointment. The FMCG major’s sales grew just 3% y-o-y while net profits were down 5.5% y-o-y.
Net sales for the sample were up a strong 17.4%, some of it due to a 29% jump in the revenues of Bajaj Auto. Operating margins, however, were down 420 bps y-o-y, as total expenditure went up by a sharp 24%. Despite a huge boost (190%) in other income and a drop in raw material costs, net profits for a sample of 93 companies were up 12.6% y-o-y.
The IT pack put up an ordinary show. TCS reported a rise in revenues, in constant currency terms, of 1.1% q-o-q, just about in line with estimates. However, the cost optimisation in resources helped the margins expand by a sharp 100 bps q-o-q and 150 bps y-o-y. Importantly, deal wins during the quarter were exceptionally strong at $13.2 billion.
Infosys reported a revenue decline of 2.2%, missing estimates. Moreover, the 1-3% revenue guidance for FY2025 is lower than the earlier 4-7%, suggesting discretionary spends are expected to stay weak. However, the Street believes the strong deal wins make the revenue targets realistic.
Among banks, HDFC Bank’s performance was fairly good even though growth may have slowed. Analysts were encouraged by the strengthening liability franchise and stable net interest margins.
Bajaj Auto reported a smart jump in Ebitda, up 34% y-o-y, above estimates driven by a richer product mix in the domestic and export markets. The quarter saw strong volume growth of 24% y-o-y driven by a 31% y-o-y increase in the domestic 2-wheelers on steady demand trends and some favourable base effects. The standalone operating profit margin came in at 20.1%, a good rise of -80 bps y-o-y.
Although Tata Consumer Products’ revenues went up by just 8%, below analysts’ expectations as volumes grew by just 5%. However, the operating margin expanded 190 bps y-o-y on the back of softer commodity prices and strong operating cost controls.
Lower costs came to the aid of metals producer Hindustan Zinc whose earnings before interest, tax, depreciation and amortisation (ebitda) was down 14% y-o-y. The management does not expect any big jump in volumes or incremental cost reduction.
Rallis’ numbers were expectedly muted given the weak demand as also price pressures. Losses at both the PBT and Pat levels were bigger than expected. It was an unexciting quarter for Tata Communications as organic data revenue growth moderated to 4.8% y-o-y and margins contracted sequentially. Tata Elxsi’s revenues fell 0.6% qoq in 4QFY24, well below estimates with the performance subdued across verticals. Margins were weaker and analysts are apprehensive of the increasing dependence on top-5 clients.