Cement, technology, telecom, IT pull down the rest; surge in auto, pharma, metals, construction and media sectors.
An extensive analysis of the available results of companies for the just-concluded fourth quarter (January-March, Q4) shows robust growth in sales and profit, carrying forward the momentum from earlier quarters.
The scan here is of the preview of results made by 10 prominent broking companies of the available Q4 results. The companies in question total 259, including all those from the benchmark indices of the Bombay Stock Exchange (the Sensex) and the National Stock Exchange, barring banking, finance and oil stocks. That leaves 38 stocks from the Sensex and Nifty and 221 others, large-cap, mid-cap and small-cap; these are the ones for which results are available.
The representative sample shows, as mentioned, strong growth in Q4. The Nifty companies, the preview of results show, are likely to see sales growth of 26 per cent and of net profit by 31 per cent; the Sensex ones should grow by 31.5 and 27 per cent, respectively. As for the ones not part of the benchmark indices, the indication is of a 20 per cent rise in net sales for these companies, with net profit growth likely to be over 50 per cent.
Operating margins for the benchmark index firms are likely to rise by 183 basis points; for the 221 others, a rise by 132 bps is indicated.
The benchmark firms' growth has been driven by relatively better performance in automobile, capital goods, engineering and metal sectors (oil and gas also did well). Cement, technology and power sectors are expected to show only modest growth in net profit, while telecom is expected to show decline in profit.
The corporate sector as a whole (the 259 companies studied) should show net sales growth of 23 per cent and a robust 35-plus per cent growth in operating profit. Operating margins of all 259 should improve by 188 bps. The 221 companies not part of the main indices are expected to post better performance than compared to the first three quarters.
This preview of company results has been based on research reports from Angel Broking, Centrum Broking, Citigroup Research, CLSA, Edelweiss Research, Emkay Global, IDFC-SSKI Research, ICICI Securities, Motilal Oswal Securities, Morgan Stanley Research and Prabhudas Lilladher.
Of the 221 companies, the net sales of 14 are expected to grow by more than 100 per cent each, while 22 others are expected report net sales growth between 50 and 99 per cent each. Another 48 companies are expected to show growth in net sales between 25 and 50 per cent each. As many as 21 companies are expected to turn around, while 48 companies are expected to report more than 100 per cent growth in net profit; this is expected to be between 50 and 99 per cent for 19 companies, while 29 firms are expected to show net profit growth between 25 and 50 per cent each.
Among sectors, auto ancillaries, automobiles, construction, media, metals and pharmaceuticals are expected to drive fourth-quarter sales and profit growth. A poor show is expected from capital goods, cement and technology sector, while fast moving consumer goods firms are expected to show modest growth in sales and net profit. The improvement in operating margins of the 221 companies not part of Sensex or Nifty are likely to come from sectors such as automobiles, construction, media, metals and pharmaceuticals. Capital goods, cement and information technology companies may witness drops in operating margins.
Many auto ancillary companies have restructured their balance sheet and cost structures. The recovery in the domestic market and exports and turnaround in automobiles are expected to be reflected in these, with the 14 companies studied here to show 40 per cent growth in sales and profit. Among auto ancillaries, Bharat Forge, Bosch and Amtek Auto are expected to show robust growth in net profit.
Ashok Leyland, Bajaj Auto and TVS Motors are expected to do well, with 70 per cent growth in sales and net profit growth of over 200 per cent. Ashok Leyland is expected to post standout results, sales up 135 per cent and net profit up 400 per cent.
The cement sector is set for its worst performance in recent times, with 10 mid-cap and small-cap companies posting 20 per cent decline in net profit on the back of a net sales growth of around 9 per cent. The operating margins are likely to decline by over 350 bps on weak cement prices in southern and western regions and increase in input costs. Madras Cement, Shree Cement, UltraTech Cement and India Cement are expected to show decline in net profit on account of poor growth in net sales.
The entertainment and print media are expected to come out of the woods in this quarter on account of an increase in advertisement rates, fresh advertisement by FMCG companies and no new capital expenditure during the second quarter. The 12 companies in this segment are likely to report 25 per cent rise in sales but the net profit will increase by over 100 per cent, with strong turnaround from the electronic media and robust profit growth for HT Media and Jagran Prakashan.
The strong price rise in ferrous and non-ferrous metals and strong demand from automobiles and infrastructure segments is expected to drive sales and profit growth of metal companies. The 12 companies manufacturing aluminium, copper and steel are expected to report a 35 per cent growth in sales and 150 per cent rise in net profit, on average. National Aluminium, Hindustan Zinc, Godavari Power and Ispat and Sesa Goa are expected benefit from the rise in metal and iron ore prices. JSW Steel is expected to turnaround on the back of a rise in steel prices.
The mid-cap and small-cap pharma companies are expected to post double-digit growth in sales and profit on the back of strong results from Biocon, Cadila Healthcare, Jubilant Organosys, Panacea Biotech and IPCA Labs. Dr Reddy's Labs, Divi's Labs and Glenmark Pharmaceuticals are expected to turnaround. The growth is expected to be driven by new product launches in the US, strong growth in India, higher penetration in the emerging markets, rebounding contract manufacturing business and forex-related losses booked in the year-ago period.
Sugar companies are expected to put up a strong show, with net sales expected to rise by over 100 per cent and net profit by over 350 per cent, mainly driven by Renuka Sugar. Shree Renuka Sugars expects to post 250-plus per cent growth in sales on account of higher sugar and distillery volumes, coupled with improved sugar prices. The operating margin is expected to be higher by 400 basis points, on higher realisation in sugar and alcohol sales.
Volumes are expected to be modest for most tier-II software service companies, with customer-specific events taking a toll on their revenues. Overall, the 16 technology companies are expected to post single-digit growth in revenue and profit is expected to grow only negligibly on account of the rupee appreciation. Mphasis is likely to see pricing pressure on sales and the impact of a pay hike on margins. Their sales and profit are expected to grow by 15 per cent.