Q3 Hits & Misses: Q3 Hits & Misses: How various sectors performed in latest quarterly results?

The October-December quarter results season has been a mixed bag so far, according to a review by ETIG. Consumer-centric sectors, including FMCG and automobiles, showed a sustained recovery in rural demand whereas urban demand was subdued, resulting in muted overall volume growth. Cement companies reported a sequential recovery in volume after a dull second quarter due to the monsoon. NIMs of banks remained under pressure though public sector (PSU) banks showed lower asset quality stress.

Automobiles

HITS: A recovery in rural demand and success of new launches were the key positives for the two-wheeler, passenger vehicle (PVs) and commercial vehicle (CVs) segments. Given its presence across PV and CV markets, M&M was a major beneficiary, posting improved revenue and margins.

MISSES: The growth was led by higher average selling price while the volume growth for most companies remained muted. For Eicher Motors, higher marketing spends impacted margin.

OUTLOOK: Reviving rural demand augurs well for bikes and tractors. The tractor segment is expected to report a double-digit growth in FY25 and may retain the momentum in FY26 as well given improving farm income. Hero Moto retained its double-digit growth guidance for FY25 and expects sustained momentum in FY26. The success of new launches in the EV category would be crucial in driving future growth for the sector.

REVENUE CHANGE (YoY): 6.1% NET PROFIT CHANGE (YoY): -1.2%

IT HITS: Recovery in the BFSI vertical in the US after facing a slack in the previous few quarters was a major positive since top IT exporters derive over one-third of revenue from this segment. An uptick in operating margin shown by a majority of the top companies despite seasonal weakness in demand was another noteworthy factor. MISSES: While a few companies reported a gradual uptick in discretionary deal wins, any major trend in that direction is still missing. In addition, companies such as Wipro and HCL Tech hinted at a greater traction in smaller, short-term deals compared with larger, transformational deals that often tend to have better margins.

OUTLOOK: Valuations across the sector look rich in anticipation of a pickup in growth while near-term momentum appears to be muted. This may keep the sector stocks range bound.

REVENUE CHANGE (YoY): 6.4% NET PROFIT CHANGE (YoY): 11.7%

Oil and Gas

HITS: For RIL, sustained domestic demand and higher refining throughput offset fall in realisation of transportation fuels. HPCL surprised with better than expected gross refining margin (GRM) and higher marketing margin. ONGC reported a marginal uptick in crude production beating analyst estimates.

MISSES: BPCL’s GRM and marketing margin missed analysts’ estimates. City gas distributors (CGD) reported lower margins due to higher prices of sourced gas amid a cut in gas supply under the Administered Price Mechanism (APM).

OUTLOOK: With general election and major state elections behind, oil marketing cos are likely to report stable performance. Capacity addition and upgradation augur well for HPCL. For ONGC, peak oil capacity is expected by the end of March 2025 and increased gas output by the June quarter. CGD companies are likely to face pressure on revenue and margins due to higher gas costs.

REVENUE CHANGE (YoY): -0.1% NET PROFIT CHANGE (YoY): -11.3%

Pharma

HITS: A milestone income from a US marketing partner and improving India and emerging markets business helped Sun Pharma to report better than expected numbers. Aurobindo Pharma reported better than expected business growth in the EU region helped by rising market penetration and demand for injectables.

MISSES: Sun Pharma’s US generic business showed weakness amid quality issues. The company’s Leqselvi launch was also delayed due to a court litigation in the US. Loss at the new Penicillin-G plant affected Aurobindo’s margin. For Apollo Healthcare, the pharmacy business expenses affected margin.

OUTLOOK: Despite margin pressure in the December quarter, Aurobindo has retained the EBITDA margin target for FY25 at 21-22% given the demand for gRevlimid in the US and uptick in EU. Expected approvals for biosimilars will be a key positive for Dr Reddy’s Lab.

REVENUE CHANGE (YoY): 10.6% NET PROFIT CHANGE (YoY): 24.3%

Banks

HITS: PSU banks delivered record low credit costs at under 40 basis points amid lower slippages compared with above 50 basis points for their private sector counterparts. PSU banks also reported strong profit growth on lower bad loan provisioning. MISSES: Net interest margin (NIM) continued to remain weak as banks strived to attract deposits.

OUTLOOK: With the RBI initiating the rate cut cycle in February MPC meeting and more cuts expected in coming months, banks are likely to continue facing NIM pressure. Tax relief in the recent Union Budget will leave more money in the hands of taxpayers, which may support deposit creation.

REVENUE CHANGE (YoY): 12.1% NET PROFIT CHANGE (YoY): 12.0%

Consumer

HITS: Revival in rural demand continued in the December quarter. Asian Paints reported traction in industrial decorative business notwithstanding the pressure on consumer business.

MISSES: Urban demand continued to moderate. Operating margin was under pressure for most. For ITC, barring agri, margins dropped in segments including cigarettes, FMCG and paper.

OUTLOOK: While the near-term performance may remain muted, demand is likely to show recovery in FY26 helped by the budgetary relief in terms of lower income tax burden.

REVENUE CHANGE (YoY): 11.7% NET PROFIT CHANGE (YoY): 11.6%

Telecom

HITS: Strong double-digit year-on-year growth in data traffic, sustained user-base expansion, and resilient EBITDA margin.

MISSES: RJio’s disappointing 11.9% year-on-year growth in average revenue per user (ARPU) at Rs 203 reflected lesser benefit of rising tariffs. In comparison, Bharti Airtel retained the sectorleading ARPU at Rs 245, which grew by 18%.

OUTLOOK: The next round of tariff increase is expected in the second-half of the calendar year, which necessitates telecom companies to derive business momentum by launching different subscription plans that can improve profitability. Also, the extent of the penetration of digital services will be crucial.

REVENUE CHANGE (YoY): 4.8% NET PROFIT CHANGE (YoY): 159.2%

Cement
HITS: After a blip, cement companies staged a sequential volume recovery amid lower operating cost. UltraTech, Shree Cement beat expectations business

MISSES: A double-digit fall in operating and net profits year-on-year with over 300 bps fall in EBITDA margin due to lower realisation and slack demand.

OUTLOOK: The performance is expected to improve further with strong demand and pricing. According to management commentaries, cement prices have improved from the December levels.

REVENUE CHANGE (YoY): 0.8% NET PROFIT CHANGE (YoY): 13.7%