Q1 Performance: Examining success stories and setbacks in India's key sectors

Corporate India's Q1 performance provides crucial insights for investors eyeing diverse sectors. Energy, automobiles, and healthcare are shining stars, while metals and chemicals face challenges.

The June 2023 quarter brought cheers to India Inc., witnessing a robust year-on-year (YoY) surge in net profit growth, primarily attributed to declining input costs. Amid a 3.8% dip in the Bloomberg Commodity Index from March to June 2023, this period saw 488 companies from the Nifty 500 index report aggregate revenue and net profit growth of 6.8% and 45%, respectively. Notably, excluding financial sectors, the aggregated EBITDA of 406 stocks surged by 23.5% YoY, reflecting the cost decline advantage.

Highlights:

• In Q1 2023, India Inc. experienced an impressive 45% YoY net profit growth.

• EBITDA margins surged in the energy, auto, and healthcare sectors, highlighting their strong performance.

• Metals and consumer discretionary sectors faced margin declines due to cost pressures.

Sector Snapshots

1. Energy: Energy emerged as a leader, reaping benefits from robust marketing margins. Three major oil companies (Indian Oil, Hindustan Petroleum, and BPCL) reported combined consolidated net profits of Rs 31,846 crore, up from a net loss of Rs 14,984 crore a year ago.

2. Automobiles: Strong growth was seen in SUVs and MHCVs, benefiting Maruti Suzuki and Mahindra & Mahindra with a robust y-o-y jump in consolidated net profits. Recovery in 2W demand, cost reductions, and improved realisations further supported the sector.

3. Healthcare: The healthcare sector exhibited a mixed performance. While US sales gained traction, domestic sales faced challenges due to weak acute therapy growth and delayed monsoons. Nevertheless, Cipla and Dr Reddy's Laboratories reported YoY jumps in net profits, driven by different strengths.

4. FMCG: Muted sales growth was countered by improved margins due to softening input prices. Nestle India and Varun Beverages reported significant YoY net profit growth, driven by prudent pricing strategies.

5. IT: The IT sector faced headwinds with weak discretionary spending and deal closure delays. Infosys and TCS reported moderate growth. Other key players faced challenges due to weak discretionary spending.
   
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6. Oil & Gas: The three OMCs shone brightly with their impressive performance, while Reliance Industries experienced a decline of 11% in net profits due to challenges in the O2C segment offset by growth in telecom and retail businesses. ONGC reported 18.4% growth, underpinned by lower-than-expected statutory levies.

7. Metals: Ferrous companies battled weak average selling prices and higher input costs, while non-ferrous firms suffered from falling metal prices. JSW Steel showed a remarkable YoY net profit increase, while Tata Steel's performance faltered in its European operations.

8. Construction Materials: Strong volume growth driven by non-trade and housing segments benefited companies like UltraTech Cement and Ambuja Cements, although elevated energy costs impacted margins.

As analysts project 20% earnings growth for Nifty 50 in 2023–24, staying informed about sector performance will undoubtedly remain a critical aspect of successful investment strategies.

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 Disclaimer: This article is intended for general information purposes only and should not be construed as insurance or investment or tax or legal advice. You should separately obtain independent advice when making decisions in these areas.