Q1 Earnings Scorecard: Strong demand drives revenue, input costs hit profits

Q1 Earnings Scorecard: Strong Demand Fuels Revenue, But Input Costs Strain Profits

Across sectors, the June 2026 quarter showcased a double-digit revenue surge, yet lower profitability due to mounting input cost pressures characterized the landscape. Consumer-oriented industries, such as automobiles and consumer goods, led the revenue growth, buoyed by sustained demand for vehicles and consumer products. Notably, Maruti Suzuki's market share expanded by 230 basis points year-on-year, reaching 41.2%, propelled by a double-digit increase in vehicle sales, particularly of compact cars and SUVs, following GST rationalisation. Bajaj Auto recorded a record export volume of 7.3 lakh units, a 54% YoY increase.

However, sectors like cement, pharmaceuticals, and downstream oil companies grappled with reduced profitability. Cement prices rose by 3% sequentially, and Ultratech Cement delivered its strongest-ever performance in terms of volume, revenue, EBITDA, and profit. Conversely, companies like Ambuja Cements and ACC experienced an 8% decline in top-line growth, driven by lower volumes despite rising transportation and packaging costs.

In the banking sector, asset quality improved, with the State Bank of India recording its lowest gross non-performing asset (GNPA) ratio of 1.5% in over two decades and a record quarterly net profit of ₹21,121.2 crore. Banks' retail, agriculture, and micro, small, and medium enterprises (MSME) portfolios continued to show double-digit YoY growth. Nevertheless, most banks faced subdued profitability as net interest margins (NIMs) either contracted or remained flat, both sequentially and year-on-year.

The pharmaceutical sector reported strong domestic and specialty sales, with Sun Pharma witnessing a 16% YoY growth in domestic sales, outpacing the overall revenue growth of 10%. Conversely, EBITDA margins contracted for companies like Dr. Reddy's and Cipla, largely due to price erosion in the US generics market, cost inflation, inventory write-offs, and investments in product development.

The oil and gas sector benefited from higher crude oil prices, with ONGC and Oil India reporting multi-fold jumps in their standalone net profits. Oil marketing companies (OMCs) also reported strong demand. However, under-recoveries for OMCs surged, leading to net losses for the quarter. The sector faces heightened volatility in crude oil prices, which could reduce revenue and profit visibility for upstream companies.

While downstream performance may remain robust, the lack of meaningful price increases could impact OMCs' profitability.

In the consumer goods sector, volume recovery was a key theme, with companies reporting growth across various categories. HUL continued its streak of strong underlying sales growth, driven by a 5% volume increase. Nestle reported its highest June quarter EBITDA margin in at least four years, at 24.2%. Quick commerce emerged as a significant growth area.

However, higher transportation and packaging costs put pressure on profitability on a sequential basis. Companies may need to undertake another round of price increases to defend their margins in the face of persistent input cost inflation.