Bird’s eye view of India Inc.’s performance in Q1 2020

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The Q1 FY2020 report card for India Inc. is out.

With 493 of the BSE 500 companies having shared their results till date, we’ve done a quick review of how the corporate sector has fared.

A look at the big picture reveals that the overall universe of BSE 500 companies has managed to grow its revenue by 7.4% YoY while the overall EBITDA grew at a YoY rate of 4.6%.

Naturally, the difference between the overall topline and EBITDA could be a reflection of various trends which differ from industry to industry and may even be due to company-specific issues. However, we delineated a few overriding trends that may have been responsible; they including the inability to pass on higher commodity prices, weak consumer sentiment, higher marketing costs due to a rise in competitive intensity and lower capacity utilization, which reduced the benefits of ‘operating leverage’ and increased the overhead cost.

Then we looked at the numbers in 5 broad groups (in some cases, we clubbed together sectors)which could give us indications of the current and imminent state of the economy’s health. These were Auto & Auto Ancillary, FMCG & Consumer Durables, Capital Goods, Infrastructure and Oil & Gas.

Some auto and auto ancillary sectors beat the odds

No surprises here; the auto sector reported a YoY revenue decline of 3.5% and YoY EBITDA decline of 16.7% in Q1FY20. Weak auto numbers impacted both OEMs and ancillary suppliers. Yet despite sector headwinds, 8 auto sector-related stocks reported YoY improvement in both revenue as well as in EBITDA during Q1FY20, along with margin expansion.

Q1 2020 performance

Source: ACE Equity

The consumption story persisted

Despite a slower than expected pick up in the economy and weak consumer sentiments, the FMCG and Consumer Durables space collectively reported YoY revenue growth of 11.3% and a YoY EBITDA growth of 15.3% in the first quarter of the current financial year. Out of the total universe, 11 stocks outperform the industry and reported stellar growth.

Q1_2020_performance.

Source: ACE Equity

Capital goods are still broadly gloomy

The slowdown in economic growth affected core sectors, which further impacted the financials of the capital goods segment. The industry reported YoY revenue and EBITDA decline of 13.1% and 44.4%, respectively, in Q1FY20. Nevertheless, despite the challenging environment, 10 capital good companies reported YoY growth in both revenue and EBITDA.

Q1_2020_performance

Source: ACE Equity

The infrastructure sector presented delightful surprises

In the midst of a discouraging slowdown in economic growth, the infrastructure space reported better than expected performance. The industry reported YoY revenue and EBITDA growth of 11.2% and 19.0%, respectively, during the quarter. Most of the companies performed well in this segment; however, 3 companies reported better than industry growth along with margin expansion

Source: ACE Equity

Oil & Gas remains a complex play

Due to volatile crude prices, the oil & gas sector reported a mixed bag of performance. Its overall revenue reported YoY growth of 5.2%, while the EBITDA declined by 17.0% YoY in Q1 FY2020. Refiners reported a decline in gross refining margins, while exploration companies witnessed negative cash flows. Only gas transmission and distribution companies reported YoY growth in revenue as well as EBITDA.

Q1_2020_performance

Source: ACE Equity

In a nutshell, India Inc. has reported positive revenue expansion, which is just about in line with GDP growth expectations. Further, while EBITDA growth is in the positive territory, macro headwinds and higher commodity prices have impacted operating profitability.

Would a proverbial professor have graded this performance with a “Good for now but can do better”?

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Disclaimer:

We, Ventura Securities Ltd, (SEBI Registration Number INH000001634) its Analysts & Associates with regard to blog article hereby solemnly declare & disclose that:

We do not have any financial interest of any nature in the company. We do not individually or collectively hold 1% or more of the securities of the company. We do not have any other material conflict of interest in the company. We do not act as a market maker in securities of the company. We do not have any directorships or other material relationships with the company. We do not have any personal interests in the securities of the company. We do not have any past significant relationships with the company such as Investment Banking or other advisory assignments or intermediary relationships. We are not responsible for the risk associated with the investment/disinvestment decision made on the basis of this blog article.

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