Early birds fly high, with net profit soaring 42%

India Inc is set to turn in a handsome performance in the second quarter (July-September) of this financial year, if the early trends persist.

An analysis of the 125 early birds (including banks and financial services companies) shows net sales rising by a robust 23 per cent and net profit by an even better 42.4 per cent. Operating margins have taken a mild knock compared with the two preceding quarters (down 50-100 basis points), but are still up a significant 230 bps year-on-year.

Net profit growth for these firms has been the best in the past five quarters, but the sales growth rate is lower than the 30 per cent-plus seen in the two preceding quarters.

The sample is still small as it includes only three Sensex companies — Infosys Technologies, Larsen & Toubro and HDFC — that have declared their Q2 results so far. But analysts said this could be part of a larger trend. All three Sensex companies have done better than the previous four quarters in terms of net profit growth.

Profit drivers for early birds are non-Sensex companies such as Essar Oil, Bajaj Auto, Mangalore Chemical, Sesa Goa and Jindal Poly Films.

The sectoral trends show automobiles, auto ancillaries, refineries, banks, fertilisers, information technologies and pharmaceuticals are likely to come out with better-than-expected results. Agro chemical, cement and domestic steel firms are expected to show a decline in profit in the second quarter.

As expected, motorcycle makers have done well, with the net profit of Bajaj Auto zooming 69 per cent on the back of strong revenue growth. The performance of software giant Infosys Technologies was better than expected with a double-digit rise in year-on-year net profit for the first time in the last three quarters. Among others, Essar Oil reported a big turnaround, with net profit of Rs 130 crore, against a net loss of Rs 94 crore in the second quarter of the previous year. Mid-cap pharmaceuticals companies are expected to fare better during the quarter, as Cadila Healthcare and Alembic have reported 50 per cent-plus net profit growth.