Engineering firms' Q1 revenue, profit to take hit due to lockdown: Report

The COVID-19 pandemic-induced lockdown and subsequent shortage of labourers during the first quarter of the fiscal is likely to push many engineering firms into losses as revenue has been impacted due to execution challenges, Emkay Global Financial Services said in a report. According to the agency, engineering companies having a diversified profile and which have been able to continue with the execution, though at moderate levels, are likely to be better placed, but would see a decline in their profit after tax as compared to Q1 FY2020.

"First quarter of this fiscal may turn out to be a forgettable quarter for engineering and capital goods sector as the lockdown has severely impacted execution for over two months for several companies in the sector," it said.

While factories and construction work resumed in several states mid-April onwards, lower demand and workforce challenges led to little execution.

"We expect revenues to decline 38 per cent year-on-year for our coverage universe," it said.

The agency further said that few of the companies under its coverage are expected to see a lower impact on revenue as parts of their business were active, which helped moderate the overall revenue decline.

"EBITDA margin for our coverage universe is expected to contract by 860 basis points on an average, year-on-year. This is mostly due to negative effects of operating leverage amid falling revenues," it noted.