When comparing businesses to invest in, use sectoral metrics

Sector-wise performance results are not exactly uniform, when it comes to measuring and comparing them. Naturally, there are parameters which correspond to a particular sector. Here's what an investor should take into consideration when looking at and across sectoral trends.

1. Banking/Finance
Net interest margin
NIM is the difference between the interest income generated on loans given and the amount of interest paid out to lenders, as a proportion of interest earning assets. It indicates how well a lender manages its assets and liabilities. A higher NIM means the lender is able to generate better profitability on every loan.


NIMs of banks have improved in recent quarters

	Net Interest Margin (%)
	Mar-19	Dec-18	Sep-18
HDFC Bank	4.4	4.3	4.3
Axis Bank	3.44	3.47	3.36
SBI	2.95	2.92	2.88

Compiled by ETIG Database

HDFC Bank has been able to maintain NIM at a healthy 4.3-4.4% for the last 10 quarters.

2. Cement/metals
EBITDA per tonne
EBITDA measures a firm's operating income. Measured against output, it shows how much a firm earns on every tonne of finished product. It captures how effectively the company turns output into profitability.

Brand strength and economies of scale lead to higher earnings

	EBITDA per tonne (Rs)
	Dec-18	Sep-18	Jun-18
Ultratech Cement	777	769	848
ACC	680	683	862

Compiled by ETIG Database

Over the years, Ultratech has managed to report higher EBITDA/tonne compared to its peers due to strong brand, pan India presence and strong operating efficiency.

	EBITDA per tonne (Rs)
	Dec-18	Dec-17
JSW Steel	12,441	9,557
Tata Steel	10,331	8,638

Despite low cost domestic operations, Tata Steel's operating profitability impacted by weak European business while JSW benefits from higher employee productivity.

3. Aviation
Passenger load factor
Passenger load factor shows how many of the total seats on offer by each airline are getting filled. It is a measure of capacity utilisation that indicates how efficiently the airline is using its existing seating capacity.

Higher PLF signifies better efficiency of operations

	PLF (%)
Company	Jan-19	Feb-19	Mar-19
Spicejet	90.9	94	93
GoAir	87.4	92.6	91.4
Vistara	84.2	89.1	86.8
IndiGo	86.4	88.4	86
Air India	80	83.3	80.8

Source: Directorate General of Civil Aviation

Revenue per available seat km & cost per available seat km
These metrics measure per unit earnings and expenses for the carrier. RASK indicates how much the airline earns per seat for every kilometre covered. CASK measures how much airline spends to operate each seat for every kilometre covered. Higher the difference between RASK and CASK, better the operating efficiency.

Operating efficiency has declined for both listed carriers

	Dec-17		Dec-18
	RASK	CASK	RASK	CASK
Spicejet	4.24	3.75	4.39	4.3
Indigo	3.82	3.16	3.7	3.61

Figures are in rupees Source: Company website

4. Oil & Gas
Gross refining margin
GRM is the difference between total value of petroleum products coming out of a refinery (output) and the price of raw material (input), which is crude. It is the realisation from turning every barrel of crude into finished products.

Inventory losses led by adverse crude prices have pulled down GRMs for refiners

	GRM ($ per barrel)
Company	Dec-18	Dec-17
RIL	8.8	11.6
Indian Oil Corp	5.12	7.42
HPCL	3.72	9.04
BPCL	2.78	7.89

RIL is able to maintain higher GRMs due to its ability to process low quality crude & better crude sourcing.

5. Automobiles
EBITDA per vehicle
Operating profits adjusted for vehicles sold provides EBITDA per vehicle. It measures how effectively the company turns every sale into profit. Higher EBITDA means a company is running operations more efficiently than competitiors.

Superior product mix and better cost controls aid profitability at unit level

	EBITDA per vehicle (Rs per unit)
Company	Mar-19	Dec-18	Mar-18
Bajaj Auto	9,739	9,176	12,581
Hero Motocorp	6,043	6,499	7,235
TVS Motors	3,396	3,796	3,157

Source: Brokerage reports

Higher share of premium bikes along with new launches have helped Bajaj Auto stay ahead of peers.

6. Retail
Same store sales growth
Same store sales growth measures increase in revenue over a period for the same set of stores. Some companies exhibit growth by making more money from stores they already own while others exhibit sales growth by opening new stores. An increase in same-store sales is a better indicator of a retailer's health as it implies existing stores are attracting more customers or customers are coming back more frequently.

Higher same store sales growth indicates healthy operations

	Same store sales growth (%)
Company	Mar-19	Dec-18	Sep-18	Jun-18
Future Retail (Big Bazaar)	10	10.1	9.4	10.1
Shoppers Stop	3.7	8.9	3.6	-1.2
Aditya Birla Fashion (Pantaloons)	-4.4	17	-2	-2

Big Bazaar has exhibited consistent same store sales growth in recent quarters.

7. Telecom
Average revenue per user
ARPU indicates the revenues generated by the mobile operator for every subscriber. Assuming subscriber base is growing, a rising ARPU means growth in revenue outpaces subscriber addition with each additional subscriber contributing more to its revenues. A declining ARPU means subscriber additions on the network outpace revenue growth. In other words, every incremental user contributes less to the total revenue.

Price wars in telecom had earlier depressed ARPU

	ARPU (Rs)
Company	Mar-19	Dec-18	Sep-18	Jun-18
Jio	126.2	130	132	135
Airtel	125	104	100	105
Vodafone-Idea	104	89	88	92

Source: brokerage reports, company website

Massive user additions have affected Jio's ARPU, but Bharti Airtel and Vodafone Idea have witnessed jump in ARPU after weeding out low value customers by hiking prices in minimum recharge plans.