The third quarter results season is here with analysts expecting the BSE Sensex companies to report a flat net income growth on a year on year basis with metals and real estate companies pulling down the earnings of Corporate India. We take a look at top sectors and how analysts are expecting them to perform during the December quarter. Excluding energy, the BSE Sensex companies can look forward to a net profit growth of 5.8% on a year on year basis and 10.7% on a quarter on quarter basis. Here is a sneak peek on sectors and its winners and losers:
Winners & losers: Bajaj Auto and Mahindra & Mahindra are likely to report a sharp decline in net profits while Hero Motocorp and Maruti Suzuki are likely to report strong earnings growth in the large-cap space. In the mid-cap universe, Eicher Motors, Wabco India and Bharat Forge are likely to report strong earnings growth.
Winners & Losers: The decline in interest rates to benefit NBFCs and housing finance companies like HDFC and LICHF. Auto finance companies such as Shriram Transport and Mahindra Finance will continue to report weak performances.
For the third quarter of FY15, analysts estimate revenue growth of 11% yoy, similar to the past several quarters, and expect volume growth to remain soft. Overall, analysts expect EBITDA growth of 17.6% for our consumer universe and 17.4% growth in PAT for the quarter—the strongest in the past 6-8 quarters, aided by strong tailwinds.
Analysts expect modest revenue growth for L&T due to material contribution from recently won large orders in FY 2016. L&T is likely to report steady margin. For BHEL, analysts expect modest revenue growth on improved execution of power projects. Margin trends, order inflows and commentary on the investment scenario will be main variables to monitor.
Winners & Losers: Dr Reddy's will report muted growth due to competition in Dacogen, which will be partially offset by the Valcyte launch; Cipla is expected to benefit from the recent Xopenex launch (through Dr Reddy's) and Baraclude's 180-day exclusivity (through Teva), which analysts believe will be booked in the API division. Given a US$2.2 bn exposure to cross currencies for the sector, analysts expect currency movements to be critical with Dr Reddy likely to have the biggest impact, given its Russia/CIS and Venezuela exposures and companies facing headwinds from yen depreciation.
Source: Kotak Institutional Securities