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Leading Indian companies are likely to report a subdued performance in the first quarter of this financial year, with the combined net profit of the 30 Sensex firms expected to decline by 4.9 per cent compared to the year-ago period, while net sales growth is estimated to remain almost flat.
The silver lining, however, is that both revenue and profit numbers would be better than the preceding quarter. The Sensex companies’ net profit was down 18.7 per cent on a year-on-year basis in the March quarter, while top line declined by 7.3 per cent.
The combined net profit of the companies in the sample might decline to Rs 54,739.4 crore from Rs 57,537.9 crore a year ago, while their net sales are expected to decline marginally to Rs 451,935.8 crore. Tata Motors is likely to top the revenue charts in the first quarter, followed by Reliance Industries and Tata Steel. The profit league table is likely to be led by Reliance Industries, followed by Tata Consultancy Services and Coal India.
The analysis is based on the first-quarter earnings estimates by leading brokerage houses such as Kotak Institutional Equity, Philip Capital, Sharekhan, Religare, Edelweiss and Karvy, among others. The coverage of the companies is, however, not uniform and not all brokerages have estimated earnings for all these companies in the sample.
The sectoral earnings trend visible in the previous quarter is likely to play in the current quarter as well. Among individual companies, Maruti Suzuki is likely to top the growth charts again, with a 60 per cent year-on-year jump in net profits, despite a muted 1.4 per cent growth in net sales.
A better show by these companies is likely to be more than negated by the likes of Tata Steel which might report a net loss compared to net profit during the same quarter last financial year. Other spoilers are likely to be Hindalco (88 per cent decline in net profit), Tata Motors (-45.2 per cent), ONGC (-34.5 per cent) and Larsen & Toubro (-19.2 per cent).
By comparison, defensives like IT, pharma and consumer staples companies might remain on the sidelines with low single-digit growth in revenues and profits in the first quarter.
Not surprisingly, brokerages don’t see it as a sign of earnings recovery. “We are yet to see a secular cyclical recovery. Broad?based earnings revival is unlikely in the first quarter. Our coverage universe (excluding oil & gas) shows an earnings decline of almost four per cent, on a year-on-year basis, despite sales growth of five per cent,” writes Anindya Bhowmik and Naveen Kulkarni of Philip Capital in their recent report on first quarter earnings. Their universe includes 129 companies across 14 sectors and it is more broad-based than the benchmark Sensex.
“Key disappointments are likely to be metals (81 per cent decline in net profit), cement (20 per cent decline), and finance (8 per cent decline). Automobiles (net profit up 37 per cent, excluding Tata motors) are likely to be the toast of the season,” writes Philip Capital’s Bhowmik. The brokerage expects strong earnings growth (high double digits) in media, agri inputs, telecom and power and moderate growth (low single digit) in defensives like pharma, IT and FMCG.
Kotak Institutional Equity is equally sanguine about the first quarter earnings season. It expects net income (net profit) to decline by 1.1% on year-on-year basis with automobiles, cement and metal & mining sectors likely to show biggest decline in earnings. On ex-energy basis, it expects net profits to decline by 3.8% on y-o-y basis.
| Chart: Earnings Estimates for Sensex Companies for June 2015 Quarter | ||||
| YoY Growth | ||||
| Net Sales | Rep PAT | Net Sales | Rep PAT | |
| Mar-11 | 341303.2 | 47387.1 | ||
| Jun-11 | 331606.2 | 45525.6 | ||
| Sep-11 | 349070.9 | 45850.3 | ||
| Dec-11 | 377201.7 | 47737.6 | ||
| Mar-12 | 408024.5 | 55077.5 | 19.5 | 16.2 |
| Jun-12 | 389599.3 | 49175.4 | 17.5 | 8.0 |
| Sep-12 | 390079.1 | 47965.4 | 11.7 | 4.6 |
| Dec-12 | 407682.4 | 49592.7 | 8.1 | 3.9 |
| Mar-13 | 432160.2 | 50127.0 | 5.9 | -9.0 |
| Jun-13 | 397116.4 | 46154.6 | 1.9 | -6.1 |
| Sep-13 | 444302.1 | 52628.7 | 13.9 | 9.7 |
| Dec-13 | 466130.6 | 59439.4 | 14.3 | 19.9 |
| Mar-14 | 485178.2 | 61899.4 | 12.3 | 23.5 |
| Jun-14 | 456318.6 | 57537.9 | 14.9 | 24.7 |
| Sep-14 | 456281.4 | 56125.1 | 2.7 | 6.6 |
| Dec-14 | 454989 | 55985.9 | -2.4 | -5.8 |
| Mar-15 | 449645.5 | 50305.2 | -7.3 | -18.7 |
| Jun-15 | 451935.8 | 54739.4 | -1.0 | -4.9 |
Note: Sensex companies numbers exclude Vedanta
Source: Capitaline, Brokerages, Bloomberg
Compiled by BS Research Bureau
