BSE Sensex: 38,220
Refer to our Jun’20
S&P CNX: 11,312
1QFY21 Results Review: Beats muted expectations
Earnings breadth positive; Nifty EPS revised up marginally
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The June-quarter (1QFY21) corporate earnings for our coverage universe were better
than our muted expectations. Sales were impacted by the COVID-led lockdowns;
however, Corporate India undertook stringent cost control measures to protect their
bottom line and arrested the decline in operating profit. Healthcare, Utilities, Private
Banks and Technology sectors reported YoY profit growth, while Autos, Retail, Metals
and Telecom posted losses. Overall, management commentaries indicated MoM
improvement in demand during the quarter after easing of the lockdown restrictions.
Nifty sales declined 29% YoY (v/s est. -30%), while EBITDA/PBT/PAT declined
6%/30%/26% YoY (v/s est. decline of 11%/39%/35%). While >50% of Nifty-50
companies reported a beat on our PAT estimates, results of some key index
heavyweights like Reliance, TCS and ITC were below expectations.
MOFSL Universe’s sales/EBITDA/PBT/PAT declined 30%/10%/36%/35% YoY (v/s est.
decline of 31%/16%/45%/43% YoY). Six sectors posted YoY profit growth – Healthcare
(27%), Utilities (16%), PSU Banks (10%), Life Insurance (4%), Private Banks (1%) and
Technology (1%). Automobiles, Metals, Retail and Telecom posted losses in line with
expectations. Capital Goods, Cement, Consumer, Oil & Gas (O&G) and NBFCs posted
YoY PAT declines of 86%, 38%, 20%, 11%, 10% (v/s est. YoY declines of 86%, 67%, 29%,
Out of the 18 sectors that we track, 9/8/1 sectors delivered PAT above/in-line/below
Sectoral Highlights – Healthcare and Technology stood out: MOSL Healthcare universe
had a spectacular run this quarter with PBT/PAT growth of 29%/27% YoY (v/s est.
decline of 6%/5% YoY). Three aspects drove the outperformance: (a) Strong revenue
and better operating leverage by API companies, (b) Sharp margin improvement due
to cost savings in the domestic formulation (DF) segment, offset by (c) High base of the
past year and company specific reasons impacting performance of the US segment.
Our Technology Universe posted in-line PAT growth of 1% YoY, despite a miss by TCS.
Commentary remains stable, while deal wins and deal pipeline are encouraging for
most IT companies
11 out of 13 companies under our coverage have seen upgrades in
FY21 PAT estimates.
Private Banks’ performance was in line with expectations – PBT declined 13% YoY
while PAT was flattish YoY. All banks reported declines in the moratorium book. Our
NBFC Universe’s performance was above expectations as PAT declined 10% YoY (v/s
est. -19% YoY). Consumer Universe posted 20% YoY PAT decline (v/s est. -29% YoY) as
Britannia, Marico, HUL, Pidilite and Asian Paints beat expectations, driven by their
focus on cost rationalization (ad spend reduction and benign input cost). Results of our
Cement Universe were above expectations (38% YoY decline in profits v/s est. 67%
YoY decline). Despite the 30% YoY volume decline, EBIDA margins remained flat YoY
led by sharp cost cuts and benign fuel prices. Out of 10 companies, 9 reported PAT
above expectations. Capital Goods universe posted a muted, but in-line performance
with PAT decline of 86% YoY.
Automobiles Universe posted PBT/PAT losses of INR79b/INR95b, dragged by lower
volumes and consequent lack of operating leverage. Tractor segment outperformed.
Out of 17 companies under our coverage, 9 posted losses. Metals Universe posted a
loss of INR30b (v/s est. INR23b loss). O&G Universe’s PAT declined 11% YoY (v/s est.
10% YoY decline). Utilities posted 16% YoY profit growth (v/s est. decline of 21%),
largely led by NTPC and Power Grid.
Gautam Duggad – Research Analyst
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.