The majority of India Inc's early June quarter results witnessed the impact of higher commodity prices and sharp inflation. However, a handful of firms reported over double-digit rise in their net profit despite the headwinds. The surge mainly came on the back of a low base (due to the COVID pandemic last year) as well as a recovery in demand and consumer sentiment.
Let's take a look:
Bharat Electronics: The company's net profit in the June quarter surged over 3,700 percent to ₹431 crore due to higher revenue and on the back of a lower base. The state-owned aerospace & defense company had posted a PAT of ₹11.15 crore in Q1FY22. The stock rose 5 percent post the earnings on July 18 and since then it has added 10 percent on the back of the strong earnings.
The company said that it has achieved a turnover of ₹3,064 crore, during Q1FY23 as against a turnover of ₹1,564 crore, up 96 percent year on year. Its EBITDA margin also improved by 1265 bps to 16.5 percent in Q1FY23.
"Q1FY23 performance was better than our expectations likely due to better than expected execution and higher than expected revenue spillover from Q4FY22. The EBITDA margin was slightly better than our estimate. However, EBITDA and PAT were also better than expectations on the back of higher-than-expected revenues," ICICI Securities said in a note.
Avenue Supermarts: The company reported over a six-fold jump in its consolidated net profit to ₹642.89 crore for the quarter ended on June 30, 2022, backed by a healthy topline and operating performance. However, the growth came on the back of a low base as the year-ago quarter was impacted by the second COVID wave. It had posted a net profit of ₹95.36 crore in the April-June quarter a year ago.
Its revenue from operations also soared 93.66 percent to ₹10,038.07 crore during the quarter under review as against ₹5,183.12 crore in the corresponding quarter last fiscal. Its EBITDA in Q1FY23 stood at ₹1,008 crore, a growth of 356 percent over the corresponding period last year and the margin expanded significantly by 590 bps to 10.3 percent in Q1FY23.
"We believe that a near-16 percent gross margin and over 10 percent operating margin lend flexibilities to the business to sharpen its value-propositions and get on to a higher growth path. If history is any sort of a guide (CY2018), this is quite likely to happen and is possibly the next big trigger for the stock. We remain bullish on the long growth runway offered by the business such that the stock can offer double-digit compounding over the coming five years," said JM Financial in a report.
Polycab India: The leading manufacturer of wires and cables in India reported a 201.85 percent rise in net profit to ₹222.5 crore in Q1 against ₹73.71 crore profit in the year-ago quarter. Revenue from operations of the company during the quarter under review rose 47.5 percent to ₹2,736.6 crore compared to ₹1,855.2 crore in the corresponding quarter of the previous fiscal.
While the firm surged 5 percent on the day it reported its earnings. Since then, it has lost around a percent as analysts feel that the volatility in metal prices will hamper the business momentum of the firm. The management has indicated that demand has tapered towards the end of June, which should continue in Q2 as well.
"For the short term, raw material volatility may impact volume and margins. Mid- to long-term, its product categories (current and planned), strong business model, superior reach, brand recall, balance sheet and a shrinking unorganized market offer investment comfort, especially in a competitive economic environment," said Phillip Capital in a recent note.
Oberoi Realty: The Mumbai-based real estate developer reported a 400 percent rise in its consolidated net profit at ₹403.08 crore in Q1FY23as against a net profit of ₹80.63 crore in Q1 FY22. Its revenue from operations also surged 221.2 percent YoY to ₹913.11 crore during the quarter. EBITDA also came in at ₹513.87 crore for Q1 FY23 as compared with ₹135.39 crore for Q1 FY22 and the operating margin rose to 53.90 percent in the quarter under review from 43.93 percent in Q1 FY22.
The stock rose 5 percent a day after the announcement of the results, however, since then it has declined around 2 percent. Brokerage house Edelweiss Securities noted that the recovery in housing demand is a key positive for Oberoi Realty. The launch of new projects and business development are the key stock catalysts in their view. “We believe upcoming launches and new project additions would determine the stock’s trajectory,” they said.
JSW Energy: The firm's net profit jumped 179 percent to ₹560 crore in the June quarter, mainly on the back of higher revenues. Its net profit came in at ₹560 crore as against ₹201 crore in the corresponding period of the previous year. During the quarter, total revenue increased by 68 percent YoY to ₹3,115 crore from ₹1,860 crore in the first quarter of FY22. Despite the robust results, the stock price of the firm declined 2.5 percent on the day it announced its earnings. It has remained flat since then.
"JSW Energy was possibly the only major private sector power company that did not bid aggressively in the tariff-based competitive bidding period of 2008-12. The company has kept its balance sheet intact. We believe management will maintain the return discipline ahead in bidding, which is the underlying reason for our optimism of growth at healthy return ratios ahead. We raise our FY23E-25E EPS by 1-5 percent, factoring in Q1. We expect EPS to see a CAGR of 14 percent over FY22-25E, on the back of projects being commissioned," said Jefferies in a note.