Key takeaways from Q1FY18 earnings and what it means for your investments

For new investor, going through MF mode is still the best way to play long-term Indian growth story

 

economy news: The June quarter earnings of the financial year 2017-18 remained soft, but on expected lines as the fallout of GST implementation led to channel destocking and discounting across consumer-facing industries. Given this, automobiles, auto-ancillaries, consumer staples, white good manufacturers and healthcare sectors faced the brunt.

The under-performance was exaggerated with input cost inflation yet to play out. The rise in commodity prices was also not passed on entirely in this quarter, as the inventory was liquidated at a discount to avail input tax-credits before GST implementation. That apart, compensation was given to the dealers / stockists / supply chain distributors for the losses they incurred on GST roll-out.

A few companies did manage to deliver better return in comparison to what analysts had pegged, and such companies got rewarded by the markets. The under-performance of IT, pharma and telecom continued. A recovery stayed elusive for IT companies amid headwinds like lower utilisation and digital investments still continuing, leading to further payback periods, while growth in revenues and volumes is still recovering in a gradual fashion.

For pharma, the troubles due to USFDA-related issues continued with elevated remediation costs plaguing the balance sheets, high R&D expenses and pricing pressures weighing on EBIDTA margin and the slower key niche drug approval pipeline is also taking a hit on the earnings.

Revenue accretion was a challenge for the telecom companies, which is evident from the ARPUs that the companies reported. Bottom-line was impacted due to high leverage levels. Reliance Jio’s aggressive price stance and the spectrum payout has resulted in data tariffs coming down, which has been compensated by the large data volume growth.

Autos continued the good show. The demand is expected to come back strongly in the second quarter. The FMCG sector is likely to see the impact of restocking in the second quarter. Festival demand and good monsoons aiding spending both on the rural and urban side along with payouts related to the seventh pay commission recommendations are the additional positives.....(read story)