Early Q2 earnings trends show good news

After a drop in sales and profits during the last quarter, companies were able to report a year-on-year growth in the September quarter helped by a gradual demand recovery, supply chain restoration and higher cost efficiencies, shows the results trend so far. Companies from banking, consumers goods, IT, and pharma added to the profit growth. Sectors such as automobiles, realty, and textiles reported a fall in profit.A sample of 232 companies that declared results for the September quarter reported 23.3 per cent year-on-year growth in the aggregate net profit, the highest in nine quarters. Revenue grew by 4.1 per cent over a 10.5 per cent drop in the previous quarter. 78860221Despite a moderate increase in the topline, the sample’s profitability expanded significantly as lower sales and advertising costs and the companies’ focus to reduce the cost of operations curbed overall expenses. The operating margin of the sample improved by 280 basis points to 24.8 per cent from the year ago.The recovery in the sample’s performance was stronger on a sequential basis since business activities in the previous quarter were severely affected by the nationwide lockdown to curtail the COVID-19 outbreak. The sample’s sales grew by 16.6 per cent in the second quarter of FY21 after falling by 11.3 per cent in the previous quarter. Net profit rose by a strong 38.5 per cent after dropping by 3.8 per cent by similar comparison. The operating margin improved by 190 basis points sequentially. 78860294The sample’s net profit growth halved to 11 per cent in the September quarter after excluding banks and finance companies reflecting that they had staged a strong recovery in profits helped by lower provisioning and lesser fresh slippages. As more companies from sectors such as automobiles, capital goods, cement, media and entertainment, realty, retail, and travel that were severely affected due to the pandemic, declare results in the coming weeks, the aggregate trend will become clearer.

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