Sectoral earnings diverge in Q1

First quarter sectoral earnings have diverged sharply on account of the impact of second Covid-19 wave and higher commodity prices impacting the margins of select sectors (auto, consumer staples, and durables). On the flip side, cyclical sectors such as metals and oil and gas (O&G) have benefitted, driving in-line aggregate earnings, said a Q1 earnings review report by the brokerage house Motilal Oswal.

Around 10 sectors have posted double-digit or a higher two-year profit, compound annual growth rate. The prominent ones among these are metals

(127 per cent), PSU banks

(60 per cent), specialty chemicals (22 per cent), private banks (15 per cent), cement (13 per cent), technology (13 per cent), and O&G (10 per cent).

Raw material cost inflation and operating deleverage have impacted most of the results in

1QFY22 .

"Cement, specialty chemicals, consumer durables, and O&G have reported beats on our

1QFY22 estimates, while auto, capital goods, NBFC, and telecom have come in below our estimates," Motilal Oswal said.

The technology universe has posted healthy in-line earnings, with USD revenue growth of 4.5 per cent quarter on quarter (QoQ). The IT companies covered by the brokerage firm have together added

71,000 employees, indicating the expectation of continued momentum in deal wins and a strong demand environment.

First quarter of FY22 marks the fourth quarter of robust QoQ revenue growth for the technology sector; 8 of 13 companies have beaten our earnings expectations, the review said.

The metals sector reported the highest ever quarterly earnings of Rs

33,700 crore and contributed to 45 per cent of incremental profit after tax, aided by strong price realisation in the domestic and export markets, although partly offset by lower volumes.