FY21 earnings: Good last quarter to a tough year
The Street will be looking for commentary on future issues in the current quarter while questioning management on demand patterns in the March quarter.
Despite the fact that the second Covid-19 wave is expected to weaken demand and affect revenues, corporate earnings for the January-March cycle are expected to rise due to a strong base. However, even after adjusting for the foundation, the figures are supposed to be reasonable. On the basis of better volumes and higher rates, revenues could rise to multi-quarter highs in Q4FY21. Profits will be boosted by cost cuts and improved operational leverage, as they have been in recent years.
In other words, while import inflation could have harmed gross margins, EBITDA margins are likely to have increased. Number comparisons in order could be less flattering. Nonetheless, thanks to global reflation, significant cost cuts, and gains from the informal sector, corporate India will end FY21 on a high note.
The Street will be looking for commentary on future issues in the current quarter while questioning managements on demand patterns in the March quarter. Net profits for the Sensex group of businesses are expected to grow by 55 per cent year on year, owing to an 11 per cent increase in sales and a sharp 23 per cent increase in operating profits.
Income increased by a whopping 125 per cent year over year for the Nifty 50 firms, thanks to a massive 17 per cent rise in total revenue and a 70 per cent increase in operating profits. The distinction stems from the fact that BPCL, IOCL, and Tata Motors, all of which registered significant losses in 4QFY20, are Nifty members but not Sensex members.
Automobiles are one of the sectors expected to do well, as high volumes — especially in the passenger car and commercial vehicle segments — are thought to have resulted in improved efficiencies, easing raw material price pressures. Even though it is a seasonally poor year, the IT services market, which has put in stellar performances in recent quarters, is expected to put in a strong showing in Q4FY21. Despite some pay increases and a modest decrease in utilisation, the figures should be high as major deals are ramped up, and businesses reap the benefits of clients’ increased investment in digital programmes.
Although there may have been some stabilisation in the market for hygiene products, a pick-up in sales of personal care products should boost revenues. FMCG companies are expected to perform well in some markets, continuing to capture share from smaller, informal players and strong rural demand balanced by a pick-up in demand in urban areas.
At the same time, there may have been some moderation in the demand for hygiene products; a pick-up in sales of personal care products should boost revenues. In the retail sector, rising yarn rates, which have risen 30% in the last six months, may have hurt clothing manufacturers, but the wedding season is thought to have helped jewellery firms. For QSRs, the pandemic’s effects may have been lessened.
Better execution and relatively high order inflows are anticipated in the engineering and capital goods market. Toll collections are thought to have surpassed 90% of pre-Covid peaks, which would favour builders.