Nifty Earnings Bounce Back After Two Weak Quarters

Operating income of nearly half of the Nifty 50 constituents met estimates and around a third surpassed analyst expectations, data compiled by BloombergQuint showed. Only 11 companies missed the consensus forecast.

The Nifty companies are reviewed based on their operating income and excludes one-offs, including the impact of corporate tax rate cuts. BloombergQuint has been tracking the estimates-versus-performance data of Nifty 50 stocks since the second quarter of 2016-17.

The three sectors that managed to outperform in the second quarter include automobile, banking and information technology, whereas operational performance of oil & gas companies and agriculture-based firm remained weak.

Banks and finance companies posted strong net interest income growth in the quarter. Pharma companies like Dr. Reddy’s Laboratories Ltd. and Sun Pharmaceutical Industries Ltd. clocked strong revenue growth due to traction in the domestic market.

While revenue of most automakers declined based on monthly sales volume, they beat Bloomberg consensus estimates on lowered street expectations.

Metal stocks too saw a drop in their top line on the back of weakening commodity prices.

Revenue of agro-chemicals maker UPL Ltd., however, jumped 84 percent due to the consolidation of recently acquired Arysta Lifesciences.

Here’s how the sectors have fared in the quarter ended September:

Agriculture

UPL

• Margins disappoint due to weak sales in high-margin geographies like North America and Europe.
• Bottom line was impacted by an exceptional loss of Rs 305 crore in the quarter.

Automobile

All companies reported results that beat estimates;

• Bajaj Auto: Beat estimates driven by higher export and dollar realisations.
• Hero: Improvement in margins seen due to recent price hikes, lower input costs.
• Maruti: Margins higher than expected on lower other expenses, favorable forex move.
• Tata Motors: Project charge, cost savings, lower marketing spends boosts JLR margins.
• Eicher: Weak performance at VE Commercial Vehicles impacted the consolidated results.
• M&M: Margins aided by lower commodity prices and increased selling price.

Cement

Ultratech

• Better pricing power in north and west aided Ultratech’s realisation.
• Overall reduction in cash cost and higher realisation drove Ebitda higher.

Construction

L&T

• Maintained guidance but overall commentary muted.
• Infrastructure segment saw a decline in order flow.

Consumer Goods

• HUL: Volume growth at 5 percent on base of 10 percent growth; Lower input costs boost gross margin.
• ITC: Cigarettes growth is steady but rural slowdown hurts FMCG.
• Asian Paints: 7th consecutive quarter of double-digit volume growth.
• Britannia: Gross margins steady but see pressure owing to higher input costs; volume growth weak.
• Nestle: High input costs weighed on operating margin; Domestic business outperforms as exports drop.
• Titan: Jewellery sales guidance in second half of FY20 cut to 11-13 percent from 20 percent as higher gold prices dissuaded customers from buying ornaments.

Oil & Gas

The sector reported in line-to-weak set of earnings:

• RIL: Operational numbers below estimates due to weaker refining performance.
• ONGC: Realisations were lower because of lower oil prices; gas realisations were flat.
• BPCL: Lower-than-expected sales and GRMs impacted financials.
• IOC: Quarter impacted by refinery shutdown, weak market volumes and higher inventory losses.
• GAIL: Numbers below estimates due to weaker marketing segment; Petrochemical segment losses contracted.

BFSI

• HDFC Bank: Higher other income, lower tax aided earnings.
• Kotak Mahindra Bank: NPAs inched up slightly.
• ICICI Bank: Healthy operating performance and credit cost moderation.
• IndusInd Bank: Loan growth lower than estimate; Margin and NPAs stay stable.
• Axis Bank: Headline asset quality improves, slippages elevated.
• SBI: Big improvement in asset quality.
• Bajaj Finance: AUM growth remains strong at 38 percent, NPAs remain stable.
• Bajaj Finserv: Operating metrics steady in life insurance business.
• HDFC: Higher dividend income and profit on sale of investments boosted earnings.
• YES Bank: Asset quality worsens and credit cost guidance doubled to 250 basis points.

IT

• Infosys: Lack of revision in upper-end of revenue growth guidance is disappointing.
• HCL Tech: Management hikes guidance.
• Wipro: Management believes the demand environment is stable, but with macro uncertainties.
• TCS: Management says it will be hard to see double-digit growth in FY20.
• Tech Mahindra: Financials boosted by enterprise segment; strong order bookings and a healthy pipeline.

Media

Zee:

• Exceptional loss of Rs 171 crore pertaining to inter-corporate deposits to related parties.
• Operating cash flow turned negative to Rs 246 crore; cash flow statement not reviewed by the auditor.

Metals

• JSW Steel: Lower realisation and higher raw material costs dragged operational performance.
• Tata Steel: Weak realisations impact margins while Europe remains a drag.
• Coal India: Lower cost and highest ever fuel supple agreement realisation aided financials even as volumes disappoint.
• Hindalco: Weak India performance while Novelis posts strong financials.
• Vedanta: Cuts FY20 capex, volume guidance and indicates higher production cost.

Pharma

• Sun Pharma: Results meet estimates but weak U.S. sales impacted financials.
• Cipla: Growth across key businesses drives overall revenue growth.
• Dr. Reddy’s: Profit grows on one-offs while internals disappoint.

Ports

Adani Ports:

• Higher other income, lower foreign exchange loss and deferred tax gains aided net profit.
• Company lowered its volume growth guidance to 8-10 percent from 10-12 percent for FY20.

Telecom

• Bharti Infratel: Numbers aided by higher exit charges and lower other expenses during the quarter.
• Bharti Airtel: Exceptional loss of Rs 28,450 crore during Q2 related to AGR dues.

Utilities

• Power Grid: Top line was impacted due to lower taxes which are a pass-through.
• NTPC: Generation decline in line with the industry’s decline due to tepid economic activity and monsoon.