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ICICI Direct Report
Margin recovery was the key highlight for Q3 FY23. Nifty operating margins (excluding financials) rose 230 basis points QoQ to 17%, primarily led by savings realised from lower raw material costs as gross margin expanded 230 bps QoQ. This is post a low of 14.7% margin recorded in the last quarter i.e. Q2 FY23.
On an aggregate basis (ex-financials), the Nifty topline for Q3 FY23 was largely flat QoQ at Rs 13.4 lakh crore with Ebitda up 16% QoQ at Rs 2.3 lakh crore and profit after tax by 16.6% QoQ at Rs 1.1 lakh crore.
On a YoY basis, Nifty topline was up 16.9% YoY while profit after tax was down 3.9% YoY primarily tracking muted profitability in the commodity space viz. metals and oil and gas domain.
Management commentary across businesses was positive on demand outlook, especially on domestic front amid progressive Union budget FY24E wherein government proposes to spend Rs 10 lakh crore (up 33% YoY) as capex with tangible multiplier effect that could potentially drive broad based economic growth domestically. Encouragingly, growth capex was bundled with path of fiscal consolidation.
Including financials (BFSI), at the Nifty level, the trend was similar with 1.6% QoQ growth in topline and 13.8% QoQ growth in profit after tax. On YoY basis however it outperformed the ex-financials subset due to healthy double digit credit growth and further improved asset quality in banking space.
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