All That You Need To Know About Q4 Numbers

As a shareholder you must be anxious to know what’s cause the stock price to rise or falls. There are number of triggers such as Broker Upgrades, Bad News for Competitors, New products i.e. when a company announces a new product or an anticipated product’s release date, securing a new large contract, change of management, apart from these triggers there is one significant trigger which shareholder looks forward every quarter is the quarterly earnings published by companies. This helps shareholder to know what’s happening in the company whose shares you hold and how it has been performing.

Quarterly outcome are the window made accessible to the general public to understand the performance. These are produced in a pre-defined format that a company must adhere to.

The January-March quarter earnings were very much vital as it is the immediate quarter post the demonetisation process and it would help us to get an idea how Indian Corporates have performed in the immediate quarter post the demonetisation process. During the October-December quarter some sectors felt the pinch of demonetisation process which was more or less expected, however, many were keenly waiting for the outcome of January-March quarter and this reports will give you an idea how sectors have performed in the January- March quarter.

In this special report we will look into the Q4 results of the companies under BSE500. Of the total 500 companies of BSE500, we have covered 428 companies.

Auto and Auto Ancillary Sector:

Auto and Auto Ancillary sector was one sector which took a hit during the demonetisation process and the month of December, 2016 if we look at the numbers were not less than the nightmare. For December, 2016, vehicles sales declined to 1,221,929 units. This is an 18.66 per cent decline. India, last reported these kinds of vehicle sales back in December 2000. Let us analyse how this sector has performed post the demonetisation process. In our coverage of Auto and Auto Ancillary sector, there are about 27 companies. On consolidated basis the total revenues of the Auto and Auto Ancillary companies stood at Rs 1,63,374 crore for the quarter January-March, 2017 as against Rs 1,58,355 crore for the same period year ago, which means an increase of 3.2 per cent YoY basis and 11.5 per cent QoQ basis. EBITDA margin for the Q4FY17 stood at 13.3 per cent as against 13.8 per cent for the same period year ago which means a moderate drop of 56bps point, whereas, if we compare it on QoQ basis there is jump of about 273bps as for the Q3FY17 margin stood at 10.6 per cent. March is generally a good month for Auto manufacturers as lot of customer schedule their purchase considering the depreciation benefit. The buying is also preponed to March with the contemplation of price hike in April. The OEMs also offer aggressive discounts in March as it marks the end of the Financial year and the OEMs performance for the Fiscal is also defined by March’s performance. March, 2017 was no different as Indian Auto Industry grew by 9 per cent YoY and it also reported the highest sales figures ever in a Financial Year. India saw sales of over 30 lakh units for the first time and also saw the marked highest growth in past 7 years. It also becomes the third fastest growing market in the world.

According to the data by SIAM India, the sales of Passenger Vehicles grew by 9.23 per cent in April-March 2017 over the same period last year. Within the Passenger Vehicles, Passenger Cars, Utility Vehicles and Vans grew by 3.85 per cent, 29.91 per cent and 2.37 per cent respectively during April-March 2017 over the same period last year.

The overall Commercial Vehicles segment registered a growth of 4.16 per cent in April-March 2017 as compared to the same period last year. Medium & Heavy Commercial Vehicles (M&HCVs) grew by 0.04 per cent and Light Commercial Vehicles grew by 7.41 per cent during April-March 2017 over the same period last year.

Three Wheelers sales dropped by 4.93 per cent in April-March 2017 over the same period last year. Passenger Carrier sales declined by 8.83 per cent and Goods Carrier sales grew by 12.75 per cent in April-March 2017 over April-March 2016.

Two Wheelers sales registered a growth at 6.89 per cent during April-March 2017 over April-March 2016. Within the Two Wheelers segment, Scooters, Motorcycles and Mopeds grew by 11.39 per cent, 3.68 per cent and 23.02 per cent respectively in April-March 2017 over April-March 2016.

After a temporary roadblock in Q3FY17 on the back of demonetisation, domestic demand for Automobiles recovered and posted a decent growth in Q4FY17 across the entire segment, expect for the Three-Wheelers segment. Domestic Passenger Vehicles demand recovered sharply, led by a robust demand for Utility Vehicles. According to Industry body, SIAM the PV segment is forecast to grow in high single digits ranging between 7-9 per cent during 2017-18, on the back of better Pay Commission pay-outs and a better agricultural crop sowing.

FMCG Sector:

For Q4 earnings review, we have taken thirty-three companies from BSE 500 Index which comprises of Consumer Discretionary and Consumer Staples.  This includes major FMCG companies like ITC, Hindustan Unilever, Marico, Dabur, EMAMI, Colgate-Palmolive (India), Procter & Gamble Hygiene, Gillette India, and Consumer Discretionary and Consumer Staples. Q3FY17 most of the FMCG companies took a hit due to the demonetisation as the flow of currency was critical for this segment, especially for the wholesale channels, the wholesale channel was cash-starved resulting which resulted in volume decline in Q3FY17. In the Q4FY17 we have seen that the FMCG showing some signs of coming back to the track as the aggregate sales for the thirty-three companies stood at Rs 60,519 crore for Q4FY17 as against 56,398 crores Q4FY16, a growth of 7.3 per cent YoY basis. EBITDA Margin for the Q4FY17 stood at 18.3 per cent as against 18 per cent compared to same period last year, which means margin witnessed a marginal up tick of 30bps for the FMCG sector for the Q4FY17. 

After facing headwinds of demonetisation in the Q3FY13 the FMCG sector is in revival mode and we expect the new two-quarters will be crucial for the FMCG sector as GST implementation and Monsoon will play a key role. As per the current tax regime, FMCG companies have to pay several forms are taxes like VAT, Service Tax, Excise Duty, Central sale tax. Under GST law it will cover all the above taxes under one single point of tax form of GST. The current tax rate for the FMCG sector including all the taxes is around 22-24 per cent. Items of mass consumption like toothpaste, Soaps, hair oil have put under the 18 per cent tax slab, significantly lower than the 22-24 per cent tax rate. The GST rate schedule indicates that about 81 per cent of all items are in the 18 per cent tax bracket or below. The remaining 19 per cent fall in the 28 per cent tax slab. Additional, increases focus on the rural section will boost the incomes, which in turn will provide better growth prospects to FMCG companies. Also, better infrastructure facilities will improve their supply chain. If FMCG players are able to grow awareness among their customers, they would be able to generate higher growth in the near future.

Information Technology Sector:

Under the Information Technology sectors, there are twenty-nine companies in the BSE 500 Index. IT sectors faced headwinds ranging from muted US growth, BREXIT, New H1B Visa and transition of existing businesses to new technologies. Aggregate sales for the universe of IT companies for the quarter ended March 2017 stood at Rs 99,054 crores an increase of 6.6 per cent YoY basis, last year in the same period sales stood at Rs 92,918 crores and on a sequential basis, there was a marginal growth of 1.8 per cent. Operating Profit for the twenty-nine companies stood at Rs 22,419 crores for the quarter ended March, 2017 as against Rs 21,559 crores for the same period in the last year an increase of 4 per cent YoY basis, whereas on sequential basis there has been a de-growth of 0.5 per cent as operating profit for Q3FY17 stood at Rs 22,541 crores. EBITDA margin slipped by 53bps on QoQ basis to 22.6 per cent in the Q4FY17 from 23.2 per cent in the same quarter of the previous year.  The sharp appreciation of INR over resulted in a QoQ impact on revenue and led to an OPM decline. India’s largest software company TCS’s shareholders approved its Rs 16,000 crore share buyback programme. It was passed through a special resolution by the board and the proposal saw 99.81 per cent of valid votes being in favour. TCS’s BFSI revenue declined during the quarter because of a large project closure in North America and the absence of subsequent backfilling. However, the scheduled ramp-up of projects won over the last six months, and the existing deal pipeline provides confidence around the recovery of the vertical going forward. The company expect improvement in performance in BFSI starting from the next quarter. The performance of Retail vertical remained subdued as reduced client spending and weakness in both North America and Europe. The industry has been going through structural problems and is expected to be under pressure over the next year. Strength in Digital has been buoyant since it saw some weakness in Q2FY17. The company expects a strong trajectory in the verticals of Communication and Hi-Tech. For Q4FY17 in Rupee terms, revenues came in at Rs 17,120 crores as against Rs 17,273 in the Q3FY17. For FY2018, Infosys has given the revue growth guidance in the range of 6.5-8.5 per cent in CC terms, while EBIT is expected to be around 23-25 per cent. While the margin guidance is lower, a major part of the same is on the back of the currency appreciation and proposed an increase in onsite capacity to mitigate any potential regulatory headwinds.

Metal and Mining Sector:

Metal and Mining sector is one sector which has really stood out in the Q4FY17. In our universe of Metal and Mining sector, we have twelve stocks from BSE 500. It includes big names like Tata Steel, Coal India, Jindal Steel, JSW Steel, Vedanta, NMDC, Hindustan Zinc, NMDC. Total Sales for the 12 stocks of Metal and Mining sector stood at Rs 1,23,368 crores in the Q4FY17 as compared to 93,102 crore in the Q4FY16 a growth 32.5 per cent YoY basis. The outstanding performance by the Metal and Mining sector have been due to few of the companies under this sector have been a case of a turnaround as companies have delivered profit from losses over a year ago period. Across the board price rise and higher volumes has benefited metals and mining companies in the fourth quarter ended March. Aluminium, Steel, Zinc, Lead and Copper prices have gone up in the range of 20-65 per cent over a year ago period. Vedanta Q4FY17 performance was driven by zinc and aluminium divisions, which combined comprises two-third of consolidated EBITDA. Vedanta availed benefits on both pricing and volume fronts. LME Zinc and Aluminium jumped 66 and 22 per cent respectively YoY. Management expects government’s push for infrastructure growth and encouraging regulatory development particularly in the mining sector to be beneficial for the company. Management expressed confidence that Zinc consumption would rise in India due to increasing urbanisation.

In a recent development, the Cabinet approved the National Steel Policy for 2017, which among other things will give preference to Indian locally manufactured steel for all government requirements as well as for public projects. The NSP proposes to enhance steel capacity to 300 million tonnes which will require an approximate investment of $150 billion over the next 10 years. The Policy seeks to increase consumption of steel and major segments are infrastructure, automobiles and housing. New Steel Policy seeks to increase per capita steel consumption to the level of 160 Kgs by 2030 from existing level of around 60 Kg. Ministry through policy measures will ensure availability of raw materials like Iron ore, Coking coal and non-coking coal, Natural gas etc. at competitive rates. This could be a boost for the sector.

Cement Sector:

In Cement sector, we have covered fifteen companies from BSE 500 Index. This includes big names like Grasim Industries, ACC, Ultratech Cement. Total Sales for Q4FY17 stood at Rs 43,107 crores a growth of 8 per cent YoY basis as for the previous year in the same period sales stood at Rs 39,916 crore. EBITDA margin for the Q4FY17 witnessed decreased 15.3 per cent; a drop of 75bps compared with Q4FY16.

As per eight core industries data Cement production declined by 13.3 per cent in the Month of January 2017 over January 2016, in the month of February 2017 cement production declined by 15.8 % in February 2017 over February 2016. Cement production declined by 6.8 per cent in March 2017 over March 2016. Its cumulative index during April to March 2016-17 declined by 1.3 per cent over the corresponding period of previous year. 

Conclusion:

The Q3FY17 was most talked around as the Q3FY17 quarter would reflect the impact of demonetisation and it was more or less in-line with the market expectation. However, coming to Q4FY17, it was eyed as a crucial one as things were seen coming back to the track after the demonetisation process. But, the Q4FY17 has been somewhat muted performance by Indian corporates. Though, during the Q4FY17 two sectors remained standouts were Metal & Mining and Oil & Gas sector. Top-line for the both the sectors have been the highlight point for the Q4FY17. Additionally, Metal and Mining sector witnessed a turnaround on YoY basis i.e. delivered profit from losses over a year ago period.