INSUBCONTINENT EXCLUSIVE:
A lower base might just come to the rescue of India Inc, which thinks revival in earnings is taking hold
The results season is all set to start tomorrow, with Infosys getting off the block.
Brokerage firm Kotak Securities expects a 7 per cent
year-on-year (yoy) rise in net profit from companies in its universe
Some of its peers, however, feel that not everything is fine with Corporate India.
Big names such as Infosys, RBL Bank, Gruh Finance and
ICIC Securities are lining up their numbers
So, what is looking good, bad and ugly
Edelweiss Securities sees commodities, consumer discretionary, retail lenders and NBFCs would post
over 20 per cent earnings growth during the quarter under review
Domestic investment and export-oriented companies including IT and pharma, and Tata Motors may log a flat growth — that's bad
The ugly will come from lenders with corporate focus and telecom, which may report losses in Q4 FY18.
Nifty companies are likely to post top
line, Ebitda and net profit growth of 14 per cent, 23 per cent and 15 per cent yoy, respectively, implying 7 per cent FY18 EPS growth, said
Edelweiss.
Let's see what key sectors have on offer insofar as the fourth quarter goes.
Energy: Kotak Securities believes that quarterly
numbers are expected to be robust for upstream PSUs, given higher global crude prices and dividend receipts
Sequentially, it will be weak for oil marketing companies (OMCs) in general due to sharply lower adventitious gains and adverse forex
The brokerage house sees the quarter marginally better for RIL, helped by ramp-up of ROGC and likely improvement in Jio’s contribution
“We model RIL’s consolidated net income to increase by 1 per cent qoq to Rs 9,470 crore in Q4 FY18 as an increase in Jio’s net income
to Rs 810 crore from Rs 500 crore in Q3 FY18 will likely be negated by lower other income from subsidiaries,” Kotak said.
Healthcare: The
sector’s Q4 top line to jump around 11 per cent YoY driven by 10 per cent growth in hospitals and 17 per cent growth in diagnostics,
Performance in the hospital space is likely to be led by Apollo Hospitals, with its Ebitda expected to go up by a strong 28 per cent
However, overall Ebitda for hospitals is expected to be dragged down by Max India (Max) due to regulatory issues and Fortis Healthcare
(Fortis), which is in the midst of a reshuffle
Financials: Market mavens see weak numbers coming in from banks due to elevated credit costs, weak NII growth and lower treasury gains
Brokerage houses also see high slippages due to recent RBI guidelines on stress recognition and resolution
“We expect most NBFCs to deliver 18-53 per cent yoy growth in core PBT supported by improving loan growth, margins and asset quality,”
Aviation: Elara Capital expects aviation firms including InterGlobe Aviation (IndiGo), SpiceJet and Jet Airways to report 14 per cent yoy
fall in their cumulative PAT due to anticipated flat yields of IndiGo and 13 per cent annual increase in unit fuel cost to Rs 1.4 per
seat-km.
“Our air-fares analysis indicates that SpiceJet better managed its yields that is expected to improve 7 per cent yoy, following
its higher exposure in lower demand quartile routes,” Elara Capital said in a report.
FMCG: There are expectations that FMCG companies
will maintain their growth momentum, largely on the back of new launches, signs of rural recovery, price reductions post GST, rate cut
across categories, early summer and strong focus on marketing activity by FMCG players.
“We expect our FMCG coverage universe to grow its
top line, Ebitda and net income by 6.3 per cent, 11.5 per cent and 10.6 per cent, respectively on yoy basis,” Nirmal Bang Securities
said.
Film exhibition: Nirmal Bang Securities expects a growth in revenues for PVR and Inox Leisure on an annual basis
This is largely because of new screen addition, increase in ticket prices, FB and advertisement prices
The improvement in margins is expected to be led by input tax credit (ITC) on non-FB items
Technology: Motilal Oswal Financial Services expects aggregate revenue growth of 3.5 per cent qoq (quarter on quarter) for tier-2 IT
companies in dollar terms, 60 bps higher than tier-1
While cross-currency movements will rub off positively across the board, the rupee, a key determinant of margins, has not moved
The brokerage firm expects Infosys to start the year by guiding for 6-8 per cent growth in constant currency (which will be higher in
TCS’ commentary on BFS and margins will be crucial as softness in both is a downside risk to current valuations.
Automobile: While strong
volumes are expected to impart operating leverage benefits, focus will continue to remain on elevated commodity cost pressure
Edelweiss believes that Tata Motors is likely to report the strongest margin expansion of 130 bps qoq as Q4 is a seasonally strong quarter
Metals: Gains from higher realisations is likely to be partially offset by increases in coking coal and iron-ore costs
Kotak Securities estimate Ebitda/tonne for domestic steel companies to increase by 11-27 per cent qoq
Real Estate: Low credit availability has led to small developers holding back launches or partnering with select developers
Softness in demand is putting further pressure.
“Channel checks suggest slower pace of re-financing from NBFCs during a seasonally strong
We expect debt to increase for Prestige (on account of acquisitions, consolidation and PE payoffs), DLF, Oberoi Realty and Brigade
Sobha continues to outperform others on operations,” Kotak said.
Telecom: Jio’s pricing moves in January 2018, impact of international
termination rate (ITR) cut effective February 1, 2018, and continued ARPU downtrading are likely to reflect in another quarter of sharp
sequential revenue decline for the incumbents
Continued exits in the challenger pack are likely to pressure Bharti Infratel’s financials further.
