Q3 Review: The Best And Worst Margin Performance In Third Quarter

Metals, industrials, and oil marketing companies dragged corporate earnings in the quarter ended December.

BloombergQuint analysed the operating performance of the companies in the broader market during the three-month period. Here’s a list of companies that witnessed the biggest jump and contraction in the margin.

Selection Criteria

The companies with a market capitalisation of at least Rs 1,000 crore.
Banking, financial services, and insurance firms were excluded.

Five Firms Whose Margin Expanded The Most

Godrej Properties

A fall in inventory costs aided Godrej Group’s real estate arm’s margin in the third quarter. Analysts said its robust project pipeline and rapidly expanding project portfolio were some of the key positives that would help the stock to continue trading at rich valuations.

Olectra Greentech

Operating performance of India’s largest manufacturer of composite insulators improved in the third quarter as raw material costs fell despite stagnant revenue growth.

Multi Commodity Exchange

Higher operating income and lower expenses aided India’s largest commodity exchange’s margin in the quarter ended December. Its Ebitda surged 88 percent year-on-year to Rs 39.2 crore, while the average daily turnover traded in commodity futures rose 16 percent to Rs 30,854 crore. Analysts said the company’s monopolistic market share remained intact and competition concerns reversed due to optimism, largely driven by growth in bullion volumes.

Mishra Dhatu Nigam

The government’s Miniratna defence PSU reported a jump in operating margin in the third quarter as raw material costs fell. Its revenue rose 35 percent over last year to Rs 206.9 crore, helped by capital investments and a healthy order book.

The company expects a “much better March quarter” as it received good orders from Indian Space Research Organisation and the equipment that it “modernised” two years back are giving good results. “Our process and yield have also improved,” Chairman and Managing Director Dinesh Kumar Likhi said in a conference call. He said 60-65 percent orders would come from the space segment in the next three years.

Shilpa Medicare

Margin of the supplier of active pharmaceutical ingredients improved in the quarter ended December as revenue from the formulations business rose and costs reduced. Its formulations revenue were higher on account of a launch of a new product in the U.S., while API revenue grew on the back of growth in oncology API business.

Note: Among the companies analysed, Dish TV India Ltd. reported the biggest jump in operating margin in the quarter ended December. That came as operating expenses of the Essel Group’s flagship direct-to-home operator tumbled. But the company in an exchange filing said its numbers aren’t comparable due to changes in the telecom regulator’s tariff regime.

Five Firms Whose Margin Contracted The Most

Graphite India & HEG

Operating margins of the electrode makers contracted during the third quarter as volumes fell, realisations declined and electrode prices dropped.

Graphite India Ltd.’s Ebitda was impacted due to an inventory write-off worth Rs 490 crore. Chairman KK Bangur said besides lower steel production, graphite electrode demand was impacted due to the existing electrode inventory.

Manish Gulati, chief operating and marketing officer at HEG Ltd., said a rise in prices of needle coke, a key raw material, also hurt the company’s operating margin.

Suzlon Energy

Higher raw material costs, a change in revenue mix and provisions hurt the debt-ridden wind turbine maker’s operating margin in the quarter ended December. The company, in its investor presentation, said its net debt rose 5 percent sequentially to Rs 12,906 crore.

Mahindra Lifespace Developers

A fall in sales volume, higher employee expenses and poor operating leverage hurt the real estate developer’s operating numbers in the third quarter. Former Managing Director and CEO Sangeet Prasad said subdued investment sentiments in the economy adversely impacted industrial land lease volumes. There was not even a single project that was completed in the third quarter, Prasad, who resigned on Feb. 7, said.

Adani Green Energy

A change in accounting standards on leasing and a rise in other expenses hurt the margin of the Adani Group’s flagship company in the third quarter. Other expenses rose 20 percent over last year to Rs 57 crore.

(The reasons for jump and contraction in margin were compiled from the research reports of Edelweiss Securities, Prabhudas Lilladher and Motilal Oswal, among others.)

(Corrects an earlier version to show updated list of companies that saw the biggest jump in margin in the third quarter.)