Corporate profitability, as defined by the earnings before interest, taxes, depreciation and ammortisation (Ebitda) margin, likely dropped 100-120 basis points (bps) on-year and 70-100 bps sequentially in the third quarter ended December 31, 2021, Crisil’s analysis of 300 companies (excluding those in the financial services, and oil and gas sectors) indicates. ” This marks the first on-year decline in 12 quarters. As many as 27 of 40 sectors tracked by CRISIL Research are likely to see their Ebitda margins shrinking” the rating firm said.
Though revenue growth is in line with expectations, the underlying reasons have changed over the past three quarters. “Companies were unable to fully pass on soaring input” said Hetal Gandhi, director, Crisil Research, cost, especially key metals and energy prices. Flat steel prices were 48 per cent higher on-year in the third quarter, while aluminium was up 41 per cent. The price of Brent crude surged nearly 79 per cent, while those of spot gas and coking coal rocketed almost 5.4x and 2.4x, respectively, on-year, according to Crisil.
In automobiles, the sales volume of commercial vehicles likely grew 8 per cent on-year, while for cars and two-wheelers it may have dropped 9 per cent and 20 per cent, respectively. However, realisations could be higher — at 12 per cent in passenger cars and utility vehicles, 7 per cent for two-wheelers and 9 per cent for commercial vehicles, on-year — due to price hikes and favourable product mix.
In the consumer business segment, leading FMCG players effected price hikes of 6-8 per cent in the first half of this fiscal, and prices likely remained high even in the reporting quarter. Revenue from export-linked sectors such as IT services likely spurted 18-20 per cent on-year, aided by rising share of digital transformation as well as possible revival of deferred projects. Revenue for pharma companies is seen growing at 6 per cent, while for readymade garments and cotton yarn makers, it’s seen up 30-35 per cent on-year amid higher exports.
