Q1 results: Investors should not be swept away by y-o-y numbers

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Investors should be careful as Y-O-Y and Q-O-Q growth numbers will give conflicting signals. While the total number will be weak, it will be an average based on areas that are expected to report good and bad numbers. Here’s a closer look.

This result is different weather and investors should be careful with the number of the first quarter. However the number will look good when it was compared to a year ago, that is not the way to go about it You also need to filter Q-O-Q numbers. Since the second covid wave and subsequent lockdown negatively affected many companies, the number for the first quarter of 2021-22 will look weaker than the relatively stable fourth quarter of 2020-21.

Commodity prices are rising and this is putting pressure on the commodity using sectors like automobiles, FMCG, etc. Cost inflation is not limited to raw materials; It is expanding to other items like packaging, distribution, transportation cost, etc. This is a double whammy – pressure on the top line due to lockdown and pressure on margins due to inflation. One also needs to consider seasonal factors. 

While the total number will be weak, it will be an average based on areas that are expected to report good and bad numbers. Let’s take a closer look.

Auto & Accessories

Auto companies faced several challenges in the last quarter. Most dealers were closed during April and May, affecting sales. However, auto companies reported good numbers for June. Expectations of net profit remain under pressure due to high input prices. 

Bank & NBFCs

Banks and non-banking finance companies reported impressive numbers by the fourth quarter of 2020-21, But they will be in consolidation mode in the first quarter of 2021-22. While the local ban reduced business activity and debt growth, the second wave led to a poor asset quality outlook

FMCG

FMCG is facing another consumer who will be under pressure in the first quarter. The demand for staples was strong during the lockdown while there was pressure on other segments.

Infotech

It companies did well during the same period last year and the favorable base effect does not apply to them. However, taking lessons from the impressive number of Accenture’s, analysts expect strong growth momentum to continue in IT.

Oil & Gas

Upstream oil companies will report bumper profits as the price of crude has now reached $75 a barrel. Oil marketing companies are also expected to get good numbers reports along with improving refining margins. 

Pharma & Healthcare

Pharma and Healthcare are now in a sweet spot. As no major action is expected on the export front, domestically oriented companies are expected to do well in the first quarter. Vaccination has picked up and this is good news for this segment.

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