Sales, profit grow in double digits, but margins drop

ET Intelligence Group: The initial trend in second-quarter results show that aggregate sales and profit continue to grow in double digits year-on-year albeit at lower profitability, marred by input cost inflation. A sample of 250 companies reported 27.7% year-on-year growth in revenue on a 6.6% fall in the year-ago quarter. Net profit rose by 23% on top of a 36.4% growth a year ago. Revenue grew in double digits for three consecutive quarters while net profit showed robust growth for five quarters in a row, including triple-digit growth in the December 2020 quarter.The sample's operating margin shrank by 425 basis points year-on-year to 21.5%, reflecting higher input costs. A basis point is 0.01 percentage point.Analysts had anticipated strong revenue growth at a lower operating margin at the beginning of the results season."We expect Q2FY22 earnings season to be strong on revenue growth on YoY basis but margin pressure will be there due to surge in costs across industries," IDBI Capital Markets & Securities said in a preview report. 87246845 Improvement Seen from Q1 On a sequential basis, aggregate numbers showed improvement in the September quarter compared with the second wave-hit previous quarter.Revenue growth improved to 12% from a drop of 5% in the previous quarter while net profit rose by 2% from a 15% drop by similar comparison. The margin contracted by 320 basis points sequentially.Second-quarter performance was driven by Reliance Industries (RIL), the country's largest company by revenue and market cap, as well as information technology (IT) sector companies. Together, they contributed 52.7% to the top line and 47.5% to the net profit of the sample. Excluding them, revenue and profit growth moderated to 19.7% and 20.3% year-on-year.As more companies from diverse sectors declare earnings in the coming weeks, the aggregate growth numbers will change. Rising import and export demand, strong GST collections, a third consecutive normal monsoon, and a pick-up in economic activities backed by a nationwide vaccination drive are expected to maintain the tempo for the remainder of the fiscal year.

from Economic Times https://ift.tt/3BaxeSX