Analysts expect the 30 Sensex companies to maintain performance at the first quarter level.
Earnings of India Inc's big guns -- the 30 companies that figure in the Bombay Stock Exchange's Sensitive Index -- may grow 8-17 per cent and their revenue by 16-28 per cent in the second quarter ended September 2008, according to estimates made by corporate analysts at top brokerages.
The comparable figures in the first quarter ended June 2008 were 12 per cent and 28.5 per cent respectively. This means these companies would maintain their performance at the previous quarter's levels, or go down marginally. However, the second quarter performance would be a remarkable improvement from the results in the fourth quarter of 2007-08 when the net profit growth rate of these 30 companies dipped to 12.5 per cent from the 20 per cent-plus growth in previous quarters.
Among Sensex companies, most corporate analysts expect Bharti Airtel, HDFC Bank, Infosys Technologies, Jaiprakash Associates, Larsen & Toubro, ONGC, Satyam Computer and Tata Steel to show a strong 25-plus per cent growth in net profit.
However, ACC, Grasim, Maruti Suzuki, Mahindra & Mahindra and Ranbaxy could see a decline in their net profits, while ICICI Bank, ITC, Reliance Industries, Reliance Communication and Wipro are expected to show a single-digit net profit growth.
The growth in net sales is expected to come from Bharti Airtel, Bhel, Jaiprakash Associates, Larsen & Toubro, Reliance Infra, Reliance Communication, Tata Steel and Tata Power. These firms are likely to show a strong 25 per cent-plus growth in net sales. ACC, Grasim, Maruti Suzuki, Mahindra & Mahindra, Ranbaxy and Tata Motors are expected to post a marginal rise in net sales.
Among banks, analysts expect HDFC Bank to put up a good show in the quarter with a net interest income (NII) growth of 54.4 per cent and net profit rise of 42.7 per cent, partly due to the merger of Centurion Bank of Punjab.
ICICI Bank is expected to post a single-digit rise in NII, while its net profit could decline by over 14 per cent on account of mark-to-market (MTM) losses. SBI seems set to post a decent 23 per cent rise in NII, while its net profit growth is expected to be in single digit due to loan provisioning.
According to auto sector analysts, the net profit of Mahindra & Mahindra and Tata Motors will be affected on account of outstanding foreign currency loans and MTM provisions for the unconverted part of foreign currency convertible bonds (FCCBs). Maruti Suzuki is expected to suffer due to rupee depreciation as the company is a net importer.
Earnings of Bhel, which is again a net importer, may be impacted, while Larsen & Toubro is likely to show MTM losses on outstanding FCCBs. Hind Unilever will be benefited from rupee depreciation as its lower import cost will be offset by exports. ITC too could get the benefit of rupee fall as 90 per cent of its agricultural products are exported.According to cement analysts, Grasim Industries and ACC will be impacted by the increase in imported coal prices.
Capital goods and engineering could prove to be a major disappointment as analysts expect a decline in margins across the sector. Bhel is likely to report a 190 basis points decline in margins due to project delays. Larsen and Toubro is expected to post a revenue growth of 28 per cent, while its net profit is likely to grow by over 40 per cent.
Rupee depreciation is positive for IT companies as more than half of their revenues is derived from exports. A rupee depreciation of 1 per cent has a positive impact on their operating margins by 30-40 basis points. However, as these companies have a significant forex cover, they have to provide for MTM losses.
Hindalco is set to put up a good show on the increase in aluminium volumes and prices. It could register a net profit growth of 25-30 per cent. Sterlite Industries is expected to benefit from robust aluminium prices, but it may see a decline in zinc realisation. As a result, the company's sales and net profit are expected to drop by over 10 per cent each. The consolidated Tata Steel is expected to witness net sales growth of over 40 per cent, while its net profit is likely to grow by over 60 per cent.
Analysts expect ONGC to report steady profits in the second quarter mostly due to the positive impact of rupee depreciation, which will offset the impact of lower crude prices.
Reliance Industries is set to report a marginal increase in profits with higher polyester and polymer margins offsetting lower margins of its intermediates.According to Sharekhan Research analysts, banking and finance, telecom and capital goods are expected to be the better performers while automobiles and cement are expected to put pressure on earnings on account of derivative losses and lower price realisation.
Citigroup Asia Pacific Research analysts expect capital goods, telecom, FMCG, software services and pharmaceuticals will drive growth, while energy, metals and cement will show a decline in growth.Experts at Edelweiss Research see strong revenue growth for the Sensex (excluding ONGC) at 27 per cent, led by oil & gas, telecom, power and IT sectors.
According to them, cement and auto companies are expected to report sluggish revenue growth, while the net profit growth for the Sensex could be 10.4 per cent, driven by telecom, metals and IT sectors. State-owned oil marketing companies, cement and auto components are likely to report a decline in their net profit, Edelweiss analysts said.
Angel Broking expects telecom, steel and oil companies will shore up the net profit growth for the Sensex companies. The net sales growth is expected to come from telecom, FMCG and oil companies.Corporate analysts at Motilal Oswal Securities expect the growth drivers to be engineering, IT, metals, oil & gas and telecom.
