The economic activity is back to normalized levels in 2QFY22, with a strong uptick seen in frequent indicators and healthy rise in COVID vaccinations. Most manufacturing facilities and project sites were fully operational during 2QFY22, post the lockdown and restrictions seen in some part of 1QFY22. As a gradual improvement was witnessed from Jun'21 onwards, with a steady decline in the COVID case load in most states, we expect utilization to have a normal level in 2QFY22, while the tendering inquiry also has picked up.
The demand for structural steel pipes picked up in 2QFY22, after a disruption in Apr'21 and May'21 due to the second COVID wave. We believe higher HRC prices would lead to 3% QoQ and 52% YoY realisation growth. Plastic packaging demand for paints is back on track during 2QFY22 as major paint manufacturers increased their production due to the higher demand. Domestically, demand for laminated tubes in the oral care category continued to show a stable growth, while the personal care (cosmetics and pharma) category is also seeing a higher demand. We expect a decent traction in fruit pulp/juice-based drinks, with a shift in preference from unorganized to organized players. We expect AMC companies to record double-digit YoY growth due to healthy inflows.
Overall, the mid-cap companies (8) under our coverage are expected to report a strong 26% YoY growth in revenue, while sequentially the revenue is likely to remain flat. Further, EBITDA margin is expected to contract by ~50bps YoY due to higher input costs. We estimate APL Apollo to report a 102% YoY growth in profit to Rs2.1bn, while Varun Beverages is expected to report a 45% YoY growth in profit to Rs2.3bn.
The mid-cap companies under our coverage are witnessing a healthy demand across categories, which is expected to result in a revenue growth of 26% YoY, while remaining flat sequentially. EBITDA is expected to grow by 24% YoY and EBITDA margin is estimated to decline by 50bps YoY. PAT is expected to grow by 34% YoY (down 1% QoQ). Thus, we expect the companies under coverage to deliver a flattish sequential growth, but a strong YoY uptick on a lower base. Going forward, we believe sustainability of the demand recovery seen from Jun'21 is likely to continue, as there is very less probability of an impact coming from a third COVID wave.