Crisil Research today said it expects a strong corporate performance in the third quarter (Q3) of FY 11, with revenues poised to accelerate to 23-24 per cent as against 21.7 per cent growth in Q2 of the fiscal.
"Demand volumes grew robustly in the second quarter of this fiscal. Since growth in consumer spending and infrastructure investments is likely to be sustained, the demand growth momentum in Q3 will continue in most industries," Crisil Research Head, Sridhar C, said in a statement here.
Revenues, which grew by 21.7 per cent in the July- September 2010 (Q2 FY 11), are likely to accelerate to 23-24 per cent in Q3 FY 11, he said.
The expected growth in revenues would be significantly higher than the 8.6 per cent growth witnessed in Q3 FY 10, "due to sustained growth in demand volumes and improving realisations," Sridhar said.
The demand volumes in Q2 of FY 11 grew since revival in discretionary corporate spending spurred growth in IT services and hotels, he said.
"A recovery in consumer spending fuelled demand growth in automobiles, retailing and consumer durables. Similarly, rising infrastructure investments pushed up demand in cement, steel and construction. These factors led to a rise in demand volumes."
Based on an analysis of the aggregate financial performance of 156 companies across 23 industries, Crisil Research expects revenues and operating profits to grow strongly at 23-24 per cent and 21-22 per cent, respectively.
The research firm expects demand volumes for passenger cars to rise by 19-20 per cent and cement despatches to grow by 12-13 per cent, compared to the same period (Q3) in the previous year.
The rising volumes would enable companies, especially in industries like passenger cars, hotels, consumer durables, airline services and cement, to improve realisations, Sridhar said.
Although operating margins were under pressure, absolute operating profits grew by a healthy 16.5 per cent in Q2 FY 11 as compared to 12.5 per cent in the same quarter (Q2) of the previous year, the research firm said. "We expect absolute operating profits to grow by 21-22 per cent in Q3 FY 11, an indicator of the strength in corporate performance," Crisil Research Director Nagarajan Narasimhan said.
Intensifying competition and rising input costs in industries such as steel, construction, would, however, exert pressure on corporate profitability, he said.
"Intense competition will limit companies' ability to fully pass on the rise in input costs to customers."
The operating profit margins, which dropped to 25.5 per cent in Q2 FY 11 from 26.7 per cent in the same quarter of the last year, are likely to remain stable at 25-26 per cent in Q3 FY 11, Narasimhan added.