Q4 Earnings: Top-line growth, cost cut drive earnings; metals pack, IT firms turn in stellar numbers

By: |
May 17, 2021 4:15 AM

The stars of the fourth quarter earnings season have been the IT services firms which have turned in stellar numbers.

FMCG firms fared well with supply chains largely restored post the lockdown and rural demand holding up: at Hindustan Unilever underlying volumes jumped 16 % y-o-y.FMCG firms fared well with supply chains largely restored post the lockdown and rural demand holding up: at Hindustan Unilever underlying volumes jumped 16 % y-o-y.

Thanks to strong top-line growth and hefty cost cutting, India Inc’s profits have surged in the three months to March.

The huge boost to the bottom line has come from better performances by the metals pack with Tata Steel, and Vedanta which gained from both better volumes and rising prices; net sales at Tata Steel jumped 39% year-on-year nudging Rs 50,000 crore.

The IT services firms also turned in very strong performances while two-wheeler companies have done well on the back of good demand both in the home and overseas markets. At Bajaj Auto, motorcycle volumes in the export market increased by 24% y-o-y and the mix too improved.Asian Paints reported a fabulous 48% y-o-y volume growth in the domestic decorative paints segment.

While sales have, no doubt, been strong, India Inc’s bottom line continues to be driven as much by cost cuts as it has been in the past three quarters. For a sample of 358 companies (excluding banks and financials) the total expenditure went up by only 8% y-o-y while revenues rose 19% y-o-y. At Gujarat Ambuja, for instance, costs declined to Rs 3,688/tonne, a drop of 4% y-o-y on the back of lower material costs, higher use of alternate fuels, better efficiencies in energy consumption and logistics and lower clinker factor. At Tata Steel expenditure went up just 15% y-o-y while sales increased 39% y-o-y. Consequently, operating profit margins for the sample have expanded 840 points y-o-y pushing up the operating profit by a stunning 105%.

The stars of the fourth quarter earnings season have been the IT services firms which have turned in stellar numbers.

FMCG firms fared well with supply chains largely restored post the lockdown and rural demand holding up: at Hindustan Unilever underlying volumes jumped 16 % y-o-y. Rural demand remains reasonably strong; at Maruti Suzuki for example, rural volumes accounted for 41% of overall volumes in FY2021 which is an increase of 200-250 bps y-o-y.

Revenues at Maruti Suzuki increased by 32% y-o-y led by a big jump in volumes and a 4.5% y-o-y increase in ASPs (average selling price). Discounts on vehicles have come down significantly to Rs 16,600 per vehicle in 4QFY21 versus Rs 19,051 in 4QFY20 as demand has picked up. Standalone revenues at Ultratech Cement increased a smart 35% y-o-y with sales volume up 30% y-o-y and capacity utilization hitting 93% y-o-y.

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