India Inc is expected to post good profit numbers for the April-June quarter, with sectors like automobiles, banking, metals, capital goods and pharmaceuticals doing reasonably well during the period.Information technology (IT) players are also expected to chip in with a decent performance thanks to an improving demand environment and better deal execution. Tata Consultancy Services will kick off the earnings season on July 11.Excluding oil marketing companies (OMCs), Kotak Institutional Equities expects the universe of companies it tracks to post a 9.3% year-on-year increase in net profits. For the Nifty 50 set of companies, profits may stay flat y-o-y and decline 10.7% sequentially.
For BSE-30 companies, the brokerage expects profits to go up by 8.1% y-o-y, but fall 8.4% sequentially. OMCs had seen big over-recoveries in retail sales of diesel and petrol in Q1FY24. Continuing stability in the prices of generics in the US as also good growth in other markets is expected to boost the earnings of pharma majors.
Production volumes for two-wheelers were up 14% y-o-y in the June quarter, though passenger vehicle manufacturers reported low single-digit growth. Revenues for the automobile space are expected to grow by 10% y-o-y on the back of an improvement in the average selling price of vehicles driven by price hikes and a richer product mix. Gross margins, however, might be under some pressure due to rising prices of commodities.With the initial data from lenders indicating that loan growth slowed in Q1FY25, there could be some moderation in earnings growth.
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As deposits were re-priced while yields remained more or less steady, net interest margins of 10-15 basis points would be seen. At the same time, asset quality is likely to be stable with banks not flagging concerns about the unsecured loan portfolios. Most of the recovery from bad loans is possibly over; as such this would not be much of a kicker for state-owned banks for the quarter.FMCG companies are expected to see better or at least stable results both in terms of value and volumes. The performance could be a mixed bag across companies depending on their core product, be it food, paints, or beauty and personal care. ITC, for instance, is expected to report reasonably good growth in cigarettes though its overall performance may be subdued.
While Nestle, Tata Consumer and Colgate are tipped to report high single-digit or double-digit top line growth, others like Dabur, Marico, Britannia and Godrej Consumer would probably post a mid single-digit increase in sales. Hindustan Unilever’s revenues are expected to stay flat. Results from players in the quick service restaurant (QSR) space are expected to be a mixed bag, with Jubilant Foodworks reporting sales in high single digits.
Several software services companies are expected to deliver a relatively good sequential growth in revenues on the back of seasonal strength and ramping up of deals won previously. Moreover, discretionary spending by clients is understood to have improved, especially in the BFSI vertical. The larger players — Wipro and TCS — will probably post stable or higher Ebit (earnings before interest and tax) margins on a y-o-y- basis. Sequentially, however, margins would vary depending on seasonal factors and the wage revision cycle.
As such, TCS and HCL Tech could report sequentially lower margins which others report an expansion.Strong prices of metals in the June quarter would have helped the top lines of base metals companies. Prices of zinc and aluminum saw a sequential rise of 16% and14%, respectively, in dollar terms. Average steel realisations, too, increased and would benefit steelmakers who would also gain from lower costs of coking coal and iron ore. Cement prices were muted during the quarter; at a pan-India level, prices were down about 4% y-o-y and 1% quarter-on-quarter. Analysts at Motilal Oswal expect blended realisations for the cement producers it tracks to have fallen both y-o-y and q-o-q.
As such, they believe the weak realisations would have offset the benefits from lower variable costs, resulting in a fall in the Ebitda per tonne.The momentum in sales and launches of real estate players is understood to have stayed resilient in the June quarter, even though aggregate pre-sales are estimated at slightly lower levels than in the March quarter. As such, developers should post healthy profit growth.For a sample of 2,645 companies (including banks and financials), net profits were up 21% y-o-y in the March quarter, the slowest in many quarters, while net sales rose 10% y-o-y. The performance was less impressive if banks and financials were excluded; net profits for a sample of 2,292 companies went up by 16% y-o-y while net sales increased by 6% y-o-y.
From: financialexpress
Financial News
