Healthcare steals Q1 sectoral show

Healthcare and technology sector stood out in the first quarter (Q1) of FY21 while aggregate performance decline was led by the automobiles, metals and capital goods sector, according to brokerage firm Motilal Oswal.

The healthcare sector showed strong revenue and operating leverage along with sharp margin improvement due to cost savings. However, subdued US market performance impacted overall profits of select companies.

Among the IT companies, Q1 performance led to upgrades for most of them.

The Q1FY21 corporate earnings came in above our muted expectations. Cost control and cash preservation were effectively deployed as tools to offset the headwinds from the lockdown-induced volume declines, Motilal Oswal said in its Q1FY21 result review.

Just 6 per cent Ebitda decline in the Nifty-50 companies despite a 30 per cent revenue decline happened on account of the ability of India Inc to drive cost control when needed, the review said.

“The healthcare universe had a spectacular run this quarter with profit before tax/ profit after tax registering growth of 29 per cent and 27 per cent year-on-year versus our estimated decline of 6 per cent/5 per cent YoY,” Gautam Duggad, research analyst, Motilal Oswal, said.

“This was largely led by significant cost savings in the domestic formulation segment and market share gains by API companies. However, the benefit was offset to some extent by subdued performance in the US,” Duggad said.

Healthcare and Technology earnings stood out– both in absolute and relative terms – and these sectors would show continued strength ahead, Duggad said.

Aggregate US sales of pharma companies declined 8.3 per cent yoy in Q1FY21.