Midcaps Q3 Earnings Preview - Demand Weakness Impacts Profitability; Margins Contract: Reliance Securities
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Reliance Securities Report
The economic activity was back to normalised levels at the beginning of Q3 FY22, while in the second half of the quarter, it deteriorated drastically amid rising Covid-19 caseloads. Majority of the manufacturing facilities and project sites were fully operational during October and November 2021, while utilisation dropped significantly in December 2021.
On the demand front, various products categories saw a healthy demand in Oct-21, while it moderated in Nov-21, which resulted into weaker festival sales and subdued wholesale dispatches amid the high inventory.
Moreover, Dec-21 witnessed a price correction across commodities, which led to inventory destocking by dealers, impacting factory level off-take.
Thus, overall volume declined YoY in single-digit across segments on the high base of last year. The sequential decline was even sharper due to weak festival sales as well as post festival inventory correction.
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