Oil, chemicals and other key sectors to drive India Inc’s revenue growth

Starting next week, India Inc will start reporting its financial results for the March quarter of 2022. Nearly half of the quarter was marked by the ongoing Russian-Ukrainian war, which has caused disruptions to the global sourcing and increased input costs for businesses.

In a report, YES Securities expects India Inc’s overall revenue growth of 19% (excluding financial and oil marketing companies), mainly driven by oil and gas, chemicals and information technology. “Adjusted PAT (profit after tax) is expected to rise 32% year-on-year, largely driven by strong performance by banks.”

Automotive industry

He said the sector is expected to experience a sharp contraction of 50%, hampered by both supply issues and rising input costs.

Financial sector

“For financials, NII growth is expected to be the strongest in the last eight quarters as credit drawdown resumed during the holiday season.” He added that financials’ operating performance is expected to remain stable year-on-year. , resulting in meager growth of 4% despite a favorable base. PAT for financials will increase at a staggering rate of 40%.

Banking sector

The report states, “Sequential loan growth would be reasonably healthy in the fourth quarter of 2021-22 as retail disbursements picked up after a relatively unimpacted third wave of COVID-19.”

New slippages in the March 2022 quarter will generally be flat to decline sequentially for banks. Incipient underlying stress may have formed due to the third wave of COVID-19 and due to disruptions caused by the Russian-Ukrainian war, he said.

Capital goods sector

YES Securities expects 4Q to be healthy for the sector, with revenue growth of 12%, as capacity utilization levels increase, due to a recovery in economic activities, capital expenditure (capex) from the government as well as the private sector continues and supply-side bottlenecks are addressed.

“We expect project companies to see revenue growth of 12% on the back of a strong recovery in their order book execution and labor availability reaching industry-leading levels. before COVID-19,” he added.

Durable consumer goods sector

For the consumer durables sector, he said gross margins are expected to remain under pressure as commodity prices continue to remain at elevated levels and companies are unable to fully pass on higher commodity prices. inputs. “We expect a strong Q1FY23 for the cooling products companies given the expectation of a tough summer and uninterrupted summer sales after two years.”

IT industry

The performance of the IT industry in the March quarter of 2022 would be slightly impacted due to the decline in the number of days during the quarter. Attrition has almost peaked for most IT companies and is expected to level off and decrease going forward. Earnings before interest and tax (EBIT) margin performance is expected to be flat (+/-20 basis points) quarter over quarter for most companies.

Infrastructure sector

The Infrastructure sector is expected to see revenue decline of 3% YoY (average) vs. 18% in 4Q21, although Q4 was the strongest quarter of execution, due to a higher base and of a delay in receipt. dates set for their HAM (Hybrid Annuity Model) portfolio.

“On the margin front, due to a sharp rise in raw material prices and a shift in revenue mix, we expect Ebitda margins to remain under pressure. Adjusted PAT is expected to remain subdued due to rising financial costs and weak overall performance,” the report said.

Pharmaceutical sector

For the pharmaceutical and healthcare sector, the March 2022 quarter will be a quarter where input costs and the trajectory of gross margin would be in focus as the first plateau of costs like freight, solvents, other key materials from China that were seen in January/early-Feb reversed course during the quarter.

Energy and chemical industries

The report states, “We expect earnings to improve QoQ and YoY for the upstream (ONGC, OINL) on higher crude. Refiners, on the other hand, should benefit from a strong improvement in refining cracks, especially in March 2022, when MS and HSD cracks reached decade highs. In addition, the likelihood of inventory gains would also contribute to refiner revenues.”

Among gas utilities, town gas distribution companies could report quarterly earnings improvement due to CNG and PNG price revisions and gas sales caps, limiting the reliance on expensive LNG.

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