India Inc reported a strong set of numbers in the June quarter, thanks to low base in the same quarter last year and localised and less strict lockdown. Select sectors like automobile and consumer durables were impacted due to the second Covid-19 wave as well as higher commodity prices, while sectors like metal report robust financial results due to strong price realisation in the domestic and global markets. Overall, components of the benchmark NSE Nifty50 posted more than 100% YoY growth in net profit on around 50% rise in net sales.
Report card: Nifty
As many as 10 companies in the Nifty index posted over 100% YoY growth in net profit during the quarter gone by, while eight reported profit in Q1FY22 over losses in Q1FY21. On the top, Oil and Natural Gas Corporation (ONGC) posted 51 times growth in net profit at Rs 5,985 crore. Grasim Industries, Hero MotoCorp, Larsen & Toubro, Bajaj Auto, Power Grid, Indian Oil Corporation, Asian Paints, UltraTech Cement and Axis Bank reported 100%-612% growth in profit after tax.
Going ahead, management from across the sectors sees an improved demand from July 2021 onwards on account of easing of lockdown restriction and a pickup in a vaccination. Financial results available with exchange further showed that companies like JSW Steel, Mahindra & Mahindra, Eicher Motors, Hindalco, Tata Steel, Maruti Suzuki, Maruti Suzuki, Sun Pharmaceutical, Titan and Bharti Airtel. On the other hand, Tata Motors reported a loss of Rs 4450.92 crore against a loss of Rs 8437.99 crore in the corresponding quarter last year.
Table Nifty companies
|Sales (Rs crore)||Profit (Rs crore)||%chg|
|Company||Apr-June 2021||Apr-June 2020||Apr-June 2021||Apr-June 2020||Sales||Profit|
|Oil & Natural Gas Corporation Ltd.||108,135.63||62,496.06||5,985.16||115.89||73.03||5,064.52|
|Grasim Industries Ltd.||19,919.40||13,043.51||1,667.30||234.19||52.72||611.94|
|Hero MotoCorp Ltd.||5,502.80||2,969.08||256.08||59.14||85.34||333.01|
|Larsen & Toubro Ltd.||29,334.73||21,259.97||1,174.44||303.14||37.98||287.42|
|Bajaj Auto Ltd.||7,216.57||2,948.52||1,170.17||395.51||144.75||195.86|
|Power Grid Corporation Of India Ltd.||10,216.48||9,457.40||5,998.28||2,048.42||8.03||192.82|
|Indian Oil Corporation Ltd.||156,519.19||90,108.91||6,109.69||2,226.80||73.70||174.37|
|Asian Paints Ltd.||5,585.36||2,922.66||568.50||218.45||91.11||160.24|
|Ultratech Cement Ltd.||11,829.84||7,671.05||1,702.63||794.20||54.21||114.38|
|Axis Bank Ltd.||16,301.55||16,705.77||2,356.91||1,099.52||-2.42||114.36|
Mid and smallcap toppers
In the broader markets, more than 200 companies with market capitalization of over Rs 1,000 crore posted over two-fold growth in bottomline figures during the quarter. On the top, Thyrocare Technologies posted a net profit of Rs 55.58 crore in Q1FY22 over Rs 0.23 crore in the same quarter last year. Topline of the company also increased by nearly 193% to Rs 164.65 crore against Rs 56.27 crore.
Other players like Mayur Uniquoters, Anupam Rasayan, Garden Reach Shipbuilders and Engineers, TV18 Broadcast, Gujarat Narmada Valley Fertilizers, Asian Star Company, India Glycol, The Jammu & Kashmir Bank, Prestige Estates Projects, MOIL and JK Paper also reported manifold growth in bottomline figures during the quarter gone by (see table).
|Sales (Rs cr)||Profit (Rs cr)||%chg|
|Company Name||Apr-June 2021||Apr-Jun 2020||Apr-June 2021||Apr-Jun 2020||Sales||Profit|
|Anupam Rasayan India||233.68||135.38||32.12||0.23||72.61||14,112.83|
|Garden Reach Shipbuilders & Engineers||304.19||109.96||20.59||0.15||176.64||13,814.86|
|TV18 Broadcast Ltd.||1,343.00||899.08||99.69||0.94||49.37||10,505.32|
|Gujarat Narmada Valley Fertilizers||1,394.32||700.23||241.80||2.97||99.12||8,041.41|
|Asian Star Company||858.76||157.04||20.57||0.27||446.83||7,491.51|
|The Jammu & Kashmir Bank||1,990.47||2,038.32||99.62||2.01||-2.35||4,856.22|
|Phillips Carbon Black||1,003.85||359.53||104.39||2.49||179.21||4,092.37|
|Prestige Estates Projects||1,415.80||1,273.70||57.30||1.60||11.16||3,481.25|
|Kovai Medical Center & Hospital||238.27||128.24||35.22||1.54||85.80||2,184.31|
|National Aluminium Company||2,474.55||1,380.63||347.48||16.69||79.23||1,981.97|
It was not a bad quarter in terms of consumption. The impact of the second wave of Covid-19 was milder in the June quarter as compared with Q1FY21. Mobility was not as restricted and companies were better prepared with their supply chains to ensure availability of products. However, the recovery in discretionary sectors including auto was affected partially but it stood better than the corresponding quarter last year, when PM Narendra Modi announced the complete nationwide lockdown to prevent the country from Covid-19 pandemic.
Monthwise, there was a robust demand during the initial part of April. It was followed by weak consumption in May. However, the situation started to improve by June-end as state governments started easing restrictions.
Midcap and smallcap companies from across the consumption-linked sectors including Dixon Technologies, MRF, TTK Prestige, Tasty Bite Eatables, EID Parry, Kansai Nerolac and Symphony also posted over 100% YoY growth in net profit during the quarter gone by.
Overall, June quarter earnings witnessed more companies reporting better than expected revenue and EBITDA, respectively. However, players from metals and minings, pharmaceuticals posted better-than-expected financial results, and financial results of banks and IT companies were in line with expectations.
Top stocks post Q1
Angel Broking is bullish on selected players from across the sectors. For instance, we continue to like Ashok Leyland with a target price of Rs 150. Ashok Leyland is one of the leading player in India CV industry with a 32% market share in the M&HCV segment. We believe that the company is ideally placed to capture the growth revival in the commercial vehicle segment and will be the biggest beneficiary of the government’s voluntary scrappage policy and hence rate the stock a Buy.
In the financial space, we are positive on HDFC Bank and AU Small Finance with a target price of Rs 1859 and Rs 1520, respectively. HDFC bank is India’s largest private sector bank with an asset book of Rs 11.3 lakh crore in FY21 and deposit base of Rs 13.4 lakh crore. It has a very well spread out book with wholesale constituting around 54% of the asset book while retail accounted for the remaining 46% of the loan book. Q1FY22 numbers were impacted due to the second Covid wave which has led to an increase in GNPA/ NNPA by 15/8bps QoQ to 1.5% and 0.5% of advances. Restructured advances at the end of the quarter stood at 0.8% of advances as compared to 0.6% in Q4FY21.
The management has indicated that 35-40 days of collections had been lost, but expects healthy recoveries from slippages in Q2FY22 which should lead to lower credit costs going forward. Given best in class asset quality and expected rebound in growth from Q2FY22 we are positive on the bank given reasonable valuations at 3.0xFY23 adjusted book which is at a discount to historical averages.
AU Small Finance Bank is one of the leading small finance banks with AUM of aroudn Rs 34,688 crore as of June 30. The lender has a well diversified geographical presence across north, central and western India. AU is also looking to scale up its home loans and business banking segment which have good growth potential. As per the business update for Q1FY22 gross advances for Q1FY22 has declined by 2% QoQ while deposits registered a growth of 3% QoQ. Collection efficiency remained strong during April/May/June at 95%/94%/114% respectively while GNPA remained stable at Rs. 1503 crore sequentially.
Restructured books also remained stable at 2.0% of books at the end of Q1FY22 (1.8% in Q4FY21). Given stable asset quality, we expect loan growth to pick up in Q2FY22 which should lead to a rerating for the bank. Analysts at Angel Broking are positive on AU small Finance Bank and recommend a ‘Buy’.
Dalmia Bharat (Target price: Rs 2,650), Safari Industries (Rs 890), Galaxy Surfactants (Rs 1,520), Stove Kraft (Rs 950), L&T Infotech (Rs 5,200) and Godrej Properties (Rs 1,800) are among our other ‘Buy’ calls post Q1 results.