OMCs to shore up India Inc profit in Q2

India Inc is likely to post a whoping 63 per cent growth in net profit in the second quarter, thanks to four oil marketing companies which are expected to post a combined net profit of Rs 2,730 crore in the quarter ended September. If one excludes these four from the sample of 235 companies studied, net profit is expected to only increase marginally, around 1 per cent.

The sales and profit growth are expected to elude the Sensex companies, which are estimated to post a combined marginal 1-3 per cent decline in sales and a 3-16 per cent decline in net profit in the quarter. Refineries, metals, pharma and real estate are expected to be the key pressure points, while cement, auto and information technology are expected to be positive contributors to the Sensex earnings.

The growth estimates for the second quarter are based on the 235 companies previewed by equity analysts from Angel Broking, Citigroup, IDFC-SSKI, Kotak Securities, Morgan Stanley and Motilal Oswal Research. The sample size is big enough to show the trend in profits, as these companies account for 80 per cent of quarterly net profit of the corporate sector.

However, sales are likely to decline for yet another quarter, with the sample companies expected to post a 8.4 per cent decline in this, on the back of a poor show from refineries, oil marketing, metals and realty firms. The net sales, excluding those for oil companies, which have a high weightage in this measurement, are expected to grow by 4.6 per cent. With automobiles, capital goods, cement, construction and power sectors to post a double-digit growth.

The profit growth is expected to come from Bajaj Auto, Hero Honda, Maruti Suzuki and Mahindra & Mahindra, Allahabad Bank, Central Bank and Kotak Mahindra Bank, ACC, Birla Corporation, JK Lakshmi Cement, Shree Cement, UltraTech Cement, Punj Lloyd, Cipla, Cadila Healthcare and Dr Reddy’s Labs. These firms are expected to post net profit growth of over 50-100 per cent each.

Looking at sectoral performance, automobiles and media are expected to stand out during the quarter, with net profit growth of 71 per cent and 269 per cent, respectively. A double-digit growth in net profit is expected from sectors such as cement (+45 per cent), pharmaceuticals (+25 per cent) and retail (+29 per cent).

The sector expected to show a decline in net profit are hotels (minus 62 per cent), non ferrous (-16 per cent), realty (-60 per cent) and steel (-24 per cent. The net profit growth is expected to be modest in sectors such as banks, capital goods, construction, FMCG, information technologies and power.