 "December quarter results: Analysts expect tepid numbers")
Dalal Street's wait for a recovery in corporate earnings growth seems to have got delayed further. The country's top listed companies are expected to deliver flat growth in profit and a decline in revenue.
However, this is an improvement over the September quarter, when the combined net profit of the Nifty 50 companies showed a 2.8 per cent decline over the same period a year before. And, combined net sales are expected to decline by 2.8 per cent, better than the 6.1 per cent drop in the previous quarter (see chart).
The analysis is based on earnings estimates by top brokerages. These include HSBC Securities, Centrum, Kotak Institutional Equity, Edelweiss, Religare, Emkay Global, IIFL and Motilal Oswal.
For banks and financial entities in the index, net sales refers to revenues net of interest expenses. For others, it's total income from sales of goods and services, excluding indirect taxes. Reported net profit includes exceptional gains and losses.
If the estimates are true, it will be the sixth quarter of a fall in revenue for Nifty companies and the sixth one of either a decline or low single-digit growth in their combined net profit.
"The third (December) quarter is expected to be another disappointing one for corporate India and raises concerns regarding a much-delayed economic recovery," said Amar Ambani, head of research at IIFL.
"Demand conditions, both in India and globally, remained weak as indicated by the sharp decline in export growth, disinflationary trend in manufacturing inflation, subdued credit growth and slowing of direct tax collection proceeds," said Dhananjay Sinha, head, institutional equity, Emkay Global Financial Services.
Many of them are hoping for gains from a step-up in government spending in the infrastructure, sector especially roads. However, "though public investments have started to gain traction, this is yet to reflect in the performance of investment-linked sectors. This is mainly attributable to weak demand in sectors such as real estate and over-capacity in several others," said CRISIL in its corporate earnings preview.
The ratings and research agency expects Indian companies to report a 'tepid' two per cent growth in revenue during the quarter, marking the sixth consecutive quarter of low-single digit growth.
Most analysts, however, expect gains from the recent depreciation in the rupee, especially in export-oriented sectors such as information technology services, despite a slowing in global trade. Manufacturing companies, especially automobile makers such as Maruti Suzuki, Hero MotoCorp, Ashok Leyland and Bajaj Auto, are also likely to gain from a continued decline in global commodity prices.
"We expect auto companies under our coverage universe (excluding Tata Motors) to report 38 per cent year-on-year growth in net profit, led by 13 per cent y-o-y growth in revenues and 180 basis points y-o-y expansion in Ebitda (operating earnings) margin," wrote analysts led by Sanjeev Prasad at Kotak Institutional Equities.
Among individual companies, crude oil refiners such as Reliance Industries, Bharat Petroleum (BPC), Hindustan Petroleum and Indian Oil are likely to be star performers in the December quarter. Followed by automobile makers, paint companies and select private banks.
Government-owned BPC is likely to top the chart with a 208 per cent y-o-y growth in net profit. Reliance Industries might report 38 per cent growth in this, by consensus estimates.
The list of laggards would be led by metal producers such as Tata Steel (profit to loss), Hindalco and Vedanta, followed by energy producers, cement makers, power utilities and pharmaceutical exporters such as Sun Pharma and Lupin. ITC, Tata Consultancy Services and Infosys are likely to be in the middle.
