These firms saw up to 12 percentage points improvement in March quarter margins over the lows of March quarter, 2020, with analysts maintaining positive views on most of these stocks.
Company reported a PAT margin of 16.79 per cent in March quarter, up from 16.39 per cent in December quarter, 15.74 per cent in September, 7.72 per cent in June and 5.36 per cent in the March quarter of last year. In total, margins for STFC expanded 11.43 percentage points in the March quarter on a year-on-year basis.
Phillip Capital said the last 12 months have been very challenging for the entire NBFC sector and the sector faced many challenges, be it on the liquidity front, maintaining collection efficiency or managing balance sheet growth.
“STFC has come out stronger on all the above parameters, which vindicates the strength of the business model and the customer segment. We expect its valuation gap with other NBFCs to narrow down,” Phillip Capital said.
JM Financial and
are two other NBFCs that have reported 650-850 basis points rise in margins over the past four quarters.
Among the two, Bajaj Finance saw margins improve to 19.65 per cent in March quarter from 17.21 per cent in the December quarter and 13.11 per cent in the year-ago quarter. Motilal Oswal Securities expects the margin improvement for the NBFC to continue in FY22 on lower cost of funds, a reduction in liquidity, a favorable base due to interest reversals.
In the case of JM Financial, PAT margin improved by 865 basis points to 28.28 per cent from 19.62 per cent in the year-ago quarter. JM Financial, said Antique Stock Broking, has clearly demonstrated the health of its book through repayments and stable asset quality.
“Reduced competitive intensity across segments, extremely well-capitalised balance sheet and improved ALM situation will ensure sharp revival in fortunes whenever the tide turns,” the brokerage said.
For the study, companies that reported losses in any of the last five quarters were excluded. Also excluded from the list were banks.
Two IT firms,
and , also showed improved margins quarter after quarter. In fact normalised operating profit margin was highest for Cyient in five years led by better efficiency, higher volume and change in revenue mix. PAT margin for the IT firm at 9.43 per cent was 508 basis points higher than 4.34 per cent in the year-ago quarter.
The company management is expecting FY22 EBIT margin to improve roughly by 200 bps despite headwind of wage hikes.
“We firmly believe the engineering and R&D story will remain intact over the long term. Having said that, Cyient could face headwinds due to lockdowns in a few states,” Edelweiss said.
In the case of Persistent Systems, the management aspires to maintain its current margin levels with upward bias led by higher offshoring, lower amortisation expense, absence of Covid-19-related expenses and cost-efficiency measures.
“We believe Persistent is well positioned to capture opportunities in transformational initiatives, given its strong capabilities in the product engineering space, strong relationship with large enterprises, strengthening of its leadership team, and focus on large long-term engagements. Margins can be sustainable despite reversal of Covid-related savings and higher investments on building capabilities,” Sharekhan said.
Laboratories margin grew marginally quarter after quarter. It stood at 24.36 per cent at the end of March quarter from 22.70 per cent YoY. Emerging markets account for 92 per cent of revenues for Caplin.
“After scripting a unique story by growing in uncharted territories, it is looking at growth in known markets. These new markets of South America and the US are a big opportunity but fraught with new challenges. That said, we continue to believe in Caplin’s capability to replicate the success story in new markets,” ICICIdirect said.
ICICI Securities has expanded its margins by 12.11 percentage points year-on-year (YoY) to 44.56 per cent from 32.44 per cent.
IIFL Securities said while overall profits could decline against FY21 owing to the decline in broking yields, continued high pace of client acquisitions and newer product propositions would aid the company in delivering a 40-50 per cent RoE going forward. The brokerages remains largely positive on the stock.
Meanwhile, Aditya Birla Money, the holding company for the financial services businesses of the Aditya Birla Group, also logged a 386 basis points rise in margins to 5.43 in March quarter over 1.57 per cent in the year-ago quarter.
