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Shares of companies that have surpassed their last fiscal’s net profit in just six months of the current financial year have performed well at the bourses, with stocks like Tech Mahindra, Reliance Communications (RCom), PVR, PI Industries, Ceat and Suven Life Sciences surging over 50 per cent each.
Despite the macro-economic headwinds that saw India Inc struggle to maintain profit growth due to rising input costs and a high interest burden, 274 companies surpassed their last year’s net profit in the first six months of H1FY14 (April – September). On average, stocks of these companies have rallied 45 per cent since March.
On the other hand, the remaining 2,301 firms recorded five per cent gain, while the benchmark indices – S&P BSE Sensex and the CNX Nifty have gained 11 per cent and nine per cent, respectively during this period.
These 274 companies posted an aggregate net profit of Rs 7,563 crore during the first half of 2013 – 14, compared with a profit of Rs 5,970 crore during the entire year ended March 2013. The sample companies had posted a net profit of Rs 3,988 crore in the first six months of last year.
The list includes, Tech Mahindra, Reliance Communications, PVR, PI Industries, Ceat, Suven Life Sciences, TV Today Network, Alembic, Sabero Organics Gujarat and Excel Crop Care.
Outperformers
The earnings’ outperformers are from various sectors that include non-banking financial companies (NBFC), textiles, pharmaceuticals, chemicals, information technology (IT), fast moving consumer goods, agro chemicals, packaging and tyres.
Ceat has appreciated more than 150 per cent to Rs 236 from Rs 94 on March 29 on the Bombay Stock Exchange. The tyre-maker reported over four-fold year-on-year (y-o-y) jump in consolidated net profit at Rs 142 crore for H1FY14, on the back of strong volume growth and lower raw material cost. The company had clocked in a net profit of Rs 33 crore in the entire previous fiscal.
Analysts at Angel Broking maintain a positive view on Ceat and suggest that the company will continue to benefit from the strong traction in the two-wheeler and passenger vehicle tyres and expected stability in commodity prices.
Most of the agrochemicals shares like United Phosphorus, PI Industries, Sabero Organics Gujarat and Excel Crop Care have appreciated between 40 – 105 per cent. These companies has posted 60 per cent y-o-y jump in aggregate net profit for H1FY2014 on account of better monsoon and robust crop season.
PVR and Inox Leisure have surged 87 per cent and 37 per cent respectively, on reporting nearly two-fold jump in net profit during first half. Analyst expect the third quarter (October – December) as the strongest one for the sector, given the strong content pipeline of big movies like Boss, Krishh 3, Ram Leela, Dhoom 3 among others.
The road ahead
While these companies managed to record a spectacular rise in their financial performance in the first six months of FY14, analysts suggest that despite some visible green shoots of recovery, the worst may not be over for India Inc.
“While our bottom up FY14 Sensex EPS has moved up to 1330 (vs 1320) post results, we do not expect this to be a broad-based earnings recovery and continue to expect downgrades to our Sensex EPS estimates and expect FY14 Sensex EPS growth to end at eight per cent growth (versus 12.5 per cent currently),” said Jyotivardhan Jaipuria, managing director and head of research at Bank of America-Merrill Lynch.
Herald van der Linde, head of equity strategy, Asia-Pacific at HSBC expects Indian equities to deliver a below average return of three per cent in 2014 and pegs the earnings growth at eight – 10 per cent. “We believe the Street’s estimate of 16 per cent earnings growth in 2014 looks too optimistic and we should see further earnings downgrades on the back of weaker domestic demand and higher interest rates,” he says.
Despite the macro-economic headwinds that saw India Inc struggle to maintain profit growth due to rising input costs and a high interest burden, 274 companies surpassed their last year’s net profit in the first six months of H1FY14 (April – September). On average, stocks of these companies have rallied 45 per cent since March.
On the other hand, the remaining 2,301 firms recorded five per cent gain, while the benchmark indices – S&P BSE Sensex and the CNX Nifty have gained 11 per cent and nine per cent, respectively during this period.
These 274 companies posted an aggregate net profit of Rs 7,563 crore during the first half of 2013 – 14, compared with a profit of Rs 5,970 crore during the entire year ended March 2013. The sample companies had posted a net profit of Rs 3,988 crore in the first six months of last year.
The list includes, Tech Mahindra, Reliance Communications, PVR, PI Industries, Ceat, Suven Life Sciences, TV Today Network, Alembic, Sabero Organics Gujarat and Excel Crop Care.
Outperformers
The earnings’ outperformers are from various sectors that include non-banking financial companies (NBFC), textiles, pharmaceuticals, chemicals, information technology (IT), fast moving consumer goods, agro chemicals, packaging and tyres.
Ceat has appreciated more than 150 per cent to Rs 236 from Rs 94 on March 29 on the Bombay Stock Exchange. The tyre-maker reported over four-fold year-on-year (y-o-y) jump in consolidated net profit at Rs 142 crore for H1FY14, on the back of strong volume growth and lower raw material cost. The company had clocked in a net profit of Rs 33 crore in the entire previous fiscal.
Analysts at Angel Broking maintain a positive view on Ceat and suggest that the company will continue to benefit from the strong traction in the two-wheeler and passenger vehicle tyres and expected stability in commodity prices.
Most of the agrochemicals shares like United Phosphorus, PI Industries, Sabero Organics Gujarat and Excel Crop Care have appreciated between 40 – 105 per cent. These companies has posted 60 per cent y-o-y jump in aggregate net profit for H1FY2014 on account of better monsoon and robust crop season.
PVR and Inox Leisure have surged 87 per cent and 37 per cent respectively, on reporting nearly two-fold jump in net profit during first half. Analyst expect the third quarter (October – December) as the strongest one for the sector, given the strong content pipeline of big movies like Boss, Krishh 3, Ram Leela, Dhoom 3 among others.
The road ahead
While these companies managed to record a spectacular rise in their financial performance in the first six months of FY14, analysts suggest that despite some visible green shoots of recovery, the worst may not be over for India Inc.
“While our bottom up FY14 Sensex EPS has moved up to 1330 (vs 1320) post results, we do not expect this to be a broad-based earnings recovery and continue to expect downgrades to our Sensex EPS estimates and expect FY14 Sensex EPS growth to end at eight per cent growth (versus 12.5 per cent currently),” said Jyotivardhan Jaipuria, managing director and head of research at Bank of America-Merrill Lynch.
Herald van der Linde, head of equity strategy, Asia-Pacific at HSBC expects Indian equities to deliver a below average return of three per cent in 2014 and pegs the earnings growth at eight – 10 per cent. “We believe the Street’s estimate of 16 per cent earnings growth in 2014 looks too optimistic and we should see further earnings downgrades on the back of weaker domestic demand and higher interest rates,” he says.
| Net profit in Rs crore | Price on BSE in Rs | |||
| Company | H1-FY14 | FY13 | 20-Nov-13 | %chg* |
| Suven Life Scie. | 75.32 | 30.84 | 73.2 | 219.7 |
| Rcom | 783.00 | 672.00 | 138.7 | 151.2 |
| CEAT | 141.87 | 140.19 | 257.4 | 174.7 |
| PVR | 46.31 | 45.75 | 588.1 | 93.8 |
| P I Inds. | 103.84 | 96.34 | 212.7 | 64.6 |
| KRBL | 131.88 | 124.40 | 31.5 | 44.5 |
| United Phosp. | 324.54 | 208.13 | 162.3 | 38.5 |
| UCO Bank | 911.31 | 618.19 | 76.8 | 37.7 |
| Inox Leisure | 28.93 | 20.02 | 84.9 | 30.7 |
| *Change over March 28, 2013 | ||||
| Source : Capitalineplus | ||||
| Data complied by BS Research | ||||
