With sales rising, industries rejuvenate
As GST imbroglio is over, industries post a growth in aggregate sales in the third quarter. This has come as a breather with many hoping for a spurt in sales in the coming days

A smart bounce-back was observed in industrial segment sales in Q3FY18, after a sharp dip in Q2FY18, particularly in projects, in which execution fell sharply due to lack of clarity on several GST-related items (subsequently revised in Nov’17). A continued series of analysis of trends across 40 industrial companies, show the following findings: a) EPC companies, particularly in the power sector, reported a strong bounce-back as execution ramped up after the resolution of GST-related hiccups; b) small-ticket industrial items maintained sales growth momentum in Q3, despite a high base that was more pronounced in the bearings sector; c) the ordering outlook continues to remain strong in sectors such as roads, railways and defence; among core sectors, capacity addition in steel has picked up, but energy installations in renewables have dropped on an anomaly in the tax structure; d) consumer durables companies in the room AC segment saw a sharp jump in sales in Q3FY18 as primary sales jumped prior to the implementation of new BEE norms in Jan’18; and e) rising commodity prices are causing concern as it would take 2-3 quarters to completely pass their impact through due to high competition; gross margins are likely to see pressure in the near term, although a favourable product mix has supported margins in the past 9 months.
Source: JM Financial Institutional Securities