Sectoral winners and losers of March 2023 quarter

The Q4FY23 results are into the last couple of weeks, but most of the large companies have already declared their quarterly results for Q4FY23 and for the full year FY23. Out of 4,200 listed companies that announce results on a regular basis on NSE / BSE, over 1,500 companies have already announced their results. However, if you look at the top 100 companies from the Nifty 50 and the Nifty Next 50, then more than 95% of the companies have already announced their numbers. In short, there is substantial data to give us a broad macro view and also a sectoral view since more than 80% of the market cap is covered.

How the macro picture looks like for Q4FY23

Let us first look at the macro picture. The 1,500 companies that have announced the results for the quarter and for the full year so far, this quarter certainly looks more promising compared to the last two quarters. Here are some of the macro highlights for the March 2023 quarter.

• Let us begin with the top line of sales or revenues. For the universe of these 1,500 companies that have announced results till date, sales revenues were up by 13.7% yoy. Sectors like autos, oil & gas and FMCG have seen sharp top line growth among the industrials. Growth has been driven by higher volumes, a bounce in rural sales and pricing support. On a sequential basis, sales revenues were up 3.8%.
   
• Let us come to the first big story for the quarter, which is the gross profits arising from the core output and before considering administrative and marketing costs. The gross profits for the quarter were up 16.9% yoy due to a sharp fall in input prices in the quarter. Even on a sequential basis, the gross profits are up by a healthy 21.6%.
   
• What about the bottom line? Net profits for the quarter were up 18.2% on a yoy basis, which is substantial growth. On a sequential basis, the profits are up by a healthy 26.4%. Unlike in the previous quarters, the pressure of a higher interest burden is largely under control. However, the real boost to the bottom line came from the sharply lower input costs in the quarter, which got transmitted to the bottom line.
   
• How do the margins look for the top 1,500 companies that have announced results till date? On a  yoy basis, gross margins are up 30 bps from 11.5% to 11.8% while the net margins are up 40 bps from 11.2% to 11.6%. How does this measure up on a sequential basis? Compared to the Dec-22 quarter, gross margins improved 170 bps while the net margins were up 210 bps on a sequential basis.

To sum up the macro story, the real story is in the bottom line. While the growth is visible on a yoy basis, the real growth is on a sequential basis. That is what has made this quarter relatively better; and encouraging too.

Sectors that outperformed in Q4FY23

Typically, these are the sectors that have done well on sales growth and also on net profit growth. Here is a quick take on the 1,500 companies that have announced Q4FY23 results.

• Banks were the undoubted stars of the fourth quarter. The sector witnessed top line growth of 31.9% yoy and net profit growth of 26.7% yoy largely on account of a sharp surge in net interest income (NII) and widening of the net interest margins (NIM).
   
• Capital goods also had a good quarter with top line revenues growing by 17% and bottom line by 22%. The top line was helped by a surge in the order book positions, while lower input costs helped boost the profits in the quarter.
   
• FMCG was also a surprise pack. The sector saw sales grow by 8% in the quarter on yoy basis while the net profits grew by 18.4%. Lower crude costs, higher rural sales, and lower cost of agri inputs helped these companies do better. Food vertical thrived.
   
• Oil & gas stocks also had a very strong quarter. While the top line was up 6.8%, the bottom line was up 43.8%. For downstream oil companies, it was about a low base and improved gross refining margins (GRMs) as well as better marketing margins.

Among others, there were the contact intensive sectors like aviation and hotels which did exceptionally well. However, we have not included them in this list as they had the  benefit of a very low base. Overall, the hits were more than the misses in Q4FY23, but let us now look at the misses too.

Sectors that underperformed in Q4FY23

Of course, the fourth quarter had its share of disappointments too. Here are some of the sectors where the Q4FY23 did not live up to the expectations.

• The big disappointment was certainly the software and IT sector. Revenues for the sector were higher by 18.6% yoy but net profits were lower by -5.7%. Lower tech spending and weaker pricing power led to lower profits for IT companies. Operating margins continue to remain under pressure.
   
• Textiles faced pressure on the top line and the bottom line. Overall sales were down -11.9% and profits were down -49%. This was the one export oriented sector hit badly by the global demand slowdown. Higher input costs only added to the pressure on profits in the quarter.
   
• Healthcare came under a lot of pressure in the quarter. Revenues were up 8.9% yoy while the net profits were down -24% on yoy basis. The pressure is coming from the discontinuation of COVID related revenue streams for this sector and that seems to be taking a toll across the sector.
   
• Finally, chemicals also disappointed with lower profits despite higher sales in the quarter.

Overall, it has been a positive quarter for Indian corporates, especially considering the global headwinds that are still quite strong.