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CRISIL Research has come out with its report on 'Financial performance preview for Q4 FY12.
As per the said research airlines, auto components, commercial vehicles, metals, real estate, hotels, textiles, organised retail, and paper sectors are expected to experience a particularly steep moderation in revenue growth compared to Q4 FY11.
India Inc set for a tepid Q4 FY12
CRISIL Research expects corporate India to report a 200-250 basis points (bps) decline in aggregate earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins in January-March 2012 (Q4 FY12). Revenue growth for the quarter is projected to be around 15% from a far healthier 25.5 % in Q4 FY11. The drop in revenue growth is reflective of the slowdown in consumption growth and sluggish investment activity, coupled with an uncertain global environment.
CRISIL Research expects corporate India to report a 200-250 basis points (bps) decline in aggregate earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins in January-March 2012 (Q4 FY12). Revenue growth for the quarter is projected to be around 15% from a far healthier 25.5 % in Q4 FY11. The drop in revenue growth is reflective of the slowdown in consumption growth and sluggish investment activity, coupled with an uncertain global environment.
EBITDA margins to drop 200-250 bps compared to Q4 FY11
Based on an analysis of the aggregate financial performance of 227 companies across 26 industries (excluding banks and oil companies), CRISIL anticipates a 200-250 basis (bps) decline in EBITDA margins in Q4 FY12 from 22 % in Q4 FY11, mainly on account of slower volume growth and high cost of inputs coupled with limited pricing flexibility. At the net profit level, the pressure is expected to be even more acute. Net margins in Q4 FY12 are likely to decline even more sharply from the 12.7 % reported in Q4 FY11 due to increased interest costs. On a QOQ basis, however, EBITDA margins will improve marginally due to the usual seasonal effect.
Based on an analysis of the aggregate financial performance of 227 companies across 26 industries (excluding banks and oil companies), CRISIL anticipates a 200-250 basis (bps) decline in EBITDA margins in Q4 FY12 from 22 % in Q4 FY11, mainly on account of slower volume growth and high cost of inputs coupled with limited pricing flexibility. At the net profit level, the pressure is expected to be even more acute. Net margins in Q4 FY12 are likely to decline even more sharply from the 12.7 % reported in Q4 FY11 due to increased interest costs. On a QOQ basis, however, EBITDA margins will improve marginally due to the usual seasonal effect.
Revenue growth and margin pressure to be broad-based
The pressure on revenue growth and EBITDA margins will be felt across industries, though companies in consumption-linked and interest rate sensitive sectors will be most vulnerable. CRISIL Research expects airlines, auto components, commercial vehicles, metals, real estate, hotels, textiles, organised retail, and paper sectors to experience a particularly steep moderation in revenue growth compared to Q4 FY11. During Q4 FY12, we anticipate a sharp drop of 400-800 bps y-o-y in margins for players in airlines, aluminium, hotels, cotton yarn, and manmade fibres sectors, mainly due to slower volume growth and high raw material and wage costs. EBITDA margins for auto and auto component makers, steel, and paper manufacturers even are likely to decline by 100-300 bps.
The pressure on revenue growth and EBITDA margins will be felt across industries, though companies in consumption-linked and interest rate sensitive sectors will be most vulnerable. CRISIL Research expects airlines, auto components, commercial vehicles, metals, real estate, hotels, textiles, organised retail, and paper sectors to experience a particularly steep moderation in revenue growth compared to Q4 FY11. During Q4 FY12, we anticipate a sharp drop of 400-800 bps y-o-y in margins for players in airlines, aluminium, hotels, cotton yarn, and manmade fibres sectors, mainly due to slower volume growth and high raw material and wage costs. EBITDA margins for auto and auto component makers, steel, and paper manufacturers even are likely to decline by 100-300 bps.
Cement, IT, and Telecom sectors to fare relatively better
On the other hand, cement companies, IT, and telecom service providers are expected tooutperform by reporting around 18% YOY revenue growth in Q4 FY12, driven in equal measure by higher volumes and improved realisations, while EBITDA margins are likely to stay stable. IT service providers are expected to report strong revenue growth of around 25% and a 100-150 bps improvement in EBITDA margins, aided by an increase in offshore volumes and the depreciation in the rupee. For telecom service providers, although volume growth would be muted, increased realisations and reducing competitive intensity would support margins.
On the other hand, cement companies, IT, and telecom service providers are expected tooutperform by reporting around 18% YOY revenue growth in Q4 FY12, driven in equal measure by higher volumes and improved realisations, while EBITDA margins are likely to stay stable. IT service providers are expected to report strong revenue growth of around 25% and a 100-150 bps improvement in EBITDA margins, aided by an increase in offshore volumes and the depreciation in the rupee. For telecom service providers, although volume growth would be muted, increased realisations and reducing competitive intensity would support margins.
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