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Decoding Q4FY18

The 4QFY18 earnings season exhibited a mixed picture, with a healthy performance from the Consumption and Commodity oriented sectors marred by a drag from Corporate Banks and Capital Goods. Meanwhile, the hopes for a long-awaited earnings recovery in FY19 stay intact. While aggregate sales and EBITDA were in line, profits were below market expectation. The miss at the PAT level for Nifty 50 can be entirely ascribed to Corporate Banks, which reported a significant jump in slippages and provisions, aggravated by the change in the RBI guidelines on NPA dispensations.

Nifty aggregate sales grew 15.5% YoY, EBITDA grew 13% and PAT grew 5%, dragged by Corporate Banks (SBI, ICICI, Axis). Excluding them, Nifty PAT growth for the rest of the 47 companies came in at 15.6%. Oil Marketing Companies strong performance boosted Nifty profitability. 21 Nifty companies reported PAT above estimates, 17 below estimates, and 12 in-line. 

Sectoral performance in Q4 

- Cement was the surprise package of this earnings season, posting a strong set of numbers with 16% YoY PAT growth

- In BFSI, while NBFCs maintained their earnings growth trajectory (35% PAT growth, multi-quarter-high), Corporate Banks reported a significant jump in slippages and provisions after the new RBI framework on asset quality (Feb’18).

- Metals, Oil & Gas, Consumer posted profits ahead of expectations, while Autos, Capital Goods, Private Banks and PSU Banks posted profits below expectations.

- Telecom posted third consecutive quarter of loss, while Healthcare universe posted fifth consecutive quarter of profit decline (-5% YoY).

- Capital Goods’ performance was below estimate on all front. However Order inflow improved; Commentary remains cautiously optimistic, given green shoots witnessed in a few industrial segments

- Metals posted another good quarter, with PAT growth of 48% YoY

- Major earnings surprises were from Bajaj Auto, M&M, Ultratech Cement, Hindustan Unilever, Bajaj Finance, HDFC, Hindalco, Tata Steel, OMCs and Coal India. Major earnings disappointments were from Eicher, Asian Paints, SBI, Axis, ICICI Bank, Vedanta, HCL and Wipro. 

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