Summing up fourth quarter results

Out of nearly 4,200 companies listed and regularly announcing results on the BSE, less than 600 companies have announced their results for the Mar-20 quarter.

Jun 16, 2020 09:06 IST India Infoline News Service

Quarterly Results
Due to the COVID-19 situation, the pace of quarterly results announcement for the Mar-20 quarter has been slower than normal. The government has given more time for listed companies to announce their quarterly results. While most of the large cap companies in the private sector have already announced their results, mid caps and PSUs are yet to announce March quarter results.

How has the macro picture of Mar-20 results panned out?

Out of nearly 4,200 companies listed and regularly announcing results on the BSE, less than 600 companies have announced their results for the Mar-20 quarter. The March quarter did see initial signs of an economic slowdown but the total lockdown only began in the last week of March.  Hence the full impact will only be visible in the June quarter. Total sales of all the companies that announced results (excluding banks) were down by 2.6% on a YOY basis. The fall was much sharper at 4.4% on a QOQ basis.

There was a sharp contraction in other income by 22% in the March quarter. The gross profits for the Mar-20 quarter were down by 24.2% on the back of higher cost of production and higher fixed costs not being fully absorbed due to lower capacity utilization. The interest cost was up by 5% for the March quarter despite a fall in interest rates across the board. Net profits for the companies that have announced results were down by 29.5%. It could have been much worse as the profit contraction was despite the 60% fall in tax expenses on the back of the shift to 22% corporate tax regime. Overall, the pressure could get worse as more results come in.

What are the sectors that saw a steep fall in the Mar-20 quarter?

There are no prices for guessing but auto and ancillaries came under pressure during the quarter. Autos reported 17.3% fall in net sales and 14.9% fall in net profits but most of the companies got a big relief from the tax cuts. Auto sales are back to 2016 levels and that is showing in the sales and profits of the sector. Another sector that came under pressure was capital goods. The sector saw 19.1% fall in net sales and a 40.7% fall in net profits. The capital goods cycle has not revived and the low capacity utilization in most industries kept sales in check. Weak investment cycle in hydrocarbons impacted heavyweights like L&T.

FMCG companies came under pressure as most company managements had already guided. They reported 4.8% fall in sales overall and 24.6% fall in net profits. Despite the demand for food products and hygiene products being robust, most of the non-essential products saw weak off-take. That kept growth tepid in FMCG companies. Metals and mining also came under pressure. Metals reported 15.8% weakness in sales on falling volumes as well as weak prices till March.  Losses deepened for metals and a lot predicates on Chinese demand.

What are the sectors that showed strength in the Mar-20 quarter?

Even in the midst of a tough quarter, there were some silver linings. For example, the agri sector reported 23.9% jump in sales and a marginal 0.8% rise in profits. The good thing is that this is reflective of the record agricultural growth of 4% in fiscal 2020. Stable purchasing power in villages has made agri products attractive once again. Most private banks have done extremely well despite risks of rising NPAs. Banks may have seen a minor jump of 5.2% in revenues but profits were up by 1500%. Of course this may be misleading as SBI sharply turned from losses to profits.

Chemical companies saw a 702% growth in net profits after they managed to keep costs under a tight leash and also expand global markets. There was some good news on the healthcare front. With total sales higher by 2.6% and profits up by 20%, it has been one of the turnaround stories of the week. Better cost rationalization, growth of the domestic market and the opportunities thrown up by COVID-19 has been positive for healthcare stocks. Power sector was another surprise package. With sales growth of 8.5% and profit growth of 68.4%. The challenges of coal availability have been addressed to a large extent, although the demand dent will only be visible in the June quarter.

The impact of COVID-19 was marginally visible in the Mar-20 quarter. For sectors like autos and capital goods, the problems started much before COVID-19. The Jun-20 quarter could be a lot more interesting; and challenging too.

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