After the near-flat growth in the first two quarters quarters, the third-quarter earnings of the 30 Sensex companies are expected to increase by 20 per cent, indicate analysts from Angel Broking, IDFC-SSKI and Motilal Oswal.
Net sales of the companies are likely to increase 25-30 per cent. Operating margins are expected to improve about 100 basis points, with power, metal, cement and automobile companies expected to deliver robust numbers.
As many as 21 of the 30 Sensex stocks are likely to report positive earnings growth. ONGC, with 90 per cent growth, Sterlite Industries (120 per cent) and a turnaround by Tata Motors would be the biggest contributors.
Oil & gas is expected to be a key contributor despite the subdued growth expected from Reliance Industries. However, fast moving consumer goods (FMCG), banking, information technology and telecom are expected to be key underperformers in the third quarter.
BHEL, the capital goods giant, is expected to report a 30-35 per cent growth in net profit, while Sun Pharmaceuticals and DLF are expected to report a drop in earnings. Bharti Airtel is expected to show a flat to single-digit growth while Reliance Communications is expected to post a 50-60 per cent decline in net profit.
Automobile and banking sectors show significant intra-sector divergence in earnings growth. Tata Motors has been the biggest swing factor for the auto sector, while HDFC and HDFC Bank are expected to push up the banking sector’s growth. Tata Motors is expected to report a profit of Rs 423 crore, as against a net loss of Rs 105 crore in the December 2008 quarter. This will mean a net earnings growth of over 350 per cent, year on year, for the sector.
Mahindra & Mahindra is likely to report a six-fold increase in profits to Rs 428 crore. Maruti Suzuki and Hero Honda are likely to report earnings growth of 160 per cent and 70 per cent growth, respectively.
HDFC and HDFC Bank are projected to report a net profit growth of over 30 per cent, while ICICI Bank is estimated to report a 10-15 per cent decline in net profit. State Bank of India is expected to report single-digit growth in net profit. ACC and Grasim Industries are expected drive the growth of the cement sector, while ITC is expected to give a push to the FMCG sector.
In frontline information technology companies, Tata Consultancy Services is expected to lead the pack with earnings growth of 21 per cent, compared to a decline of 7 per cent for Infosys Technologies and a growth of 10-15 per cent for Wipro.
