Q4 Results: 10 Mid-Cap Stocks To Watch Out For This Earnings Season

This earnings season is expected to be muted as companies struggle to take stock of the financial and economic impact of the coronavirus pandemic that shut businesses temporarily in an already slowing Indian economy.

The impact could be worse than the 2008 global financial crisis, according to Axis Capital. The onslaught of Covid-19 and the unprecedented lockdowns have altered trajectories of economies and businesses worldwide, it said in a note. Only banks and IT sectors are likely to post double to high single-digit earnings growth, while engineering, fast-moving consumer goods makers and pharma companies are expected to see low single-digit growth, it said.

According to Kotak Institutional Equities, banks and pharmaceuticals would report healthy earnings, while net income of sectors like automobiles, construction materials, metals and mining and oil would see a high double-digit decline compared to last year.

Here are the mid-cap stocks, according to analyst forecasts tracked by Bloomberg, that may report the highest expansion and contraction in their operating margin in the quarter ended March.

Selection Criteria

Market cap less than Rs 20,000 crore
Rated by more than 10 analysts
Operating margin expectations

Five stocks that are expected to witness the biggest jump in margin:

Vodafone Idea

Higher revenue due to lower subscriber churn, more broadband user additions and price hikes, coupled with the benefit from the IND AS-116 accounting standard, are likely to aid the telecom operator’s margin.

Nippon Life India

The asset manager’s revenue is expected drop, dragged by a selloff in debt, arbitrage funds and tax-saver funds on underperforming the benchmark in terms of returns over the past five years. Still, its operating profit is likely to rise, aided by cost cuts and lower commission expenses.

Birla Corp

Despite a decline in revenue, better realisation due to higher cement prices and lower fuel costs will aid its operating margins in the quarter ended March.

Rallis India

The chemical maker’s margin may be boosted by higher exports and recovery in domestic business on account of a favorable monsoon and better sowing in the Rabi season, improved operating leverage and low base due to one-offs last year.

Alembic Pharma

A recovery in India business and a stable U.S. market, besides steady sales of sartan medicines (used to treat high blood pressure), will be key reasons for higher margin in the fourth quarter of the ongoing financial season. A depreciating Indian rupee may also aid, given the drugmaker is a net exporter.

Five stocks that are expected to witness the worst contraction in margin:

Phoenix Mills

Higher residential sales in the base quarter will not only lead to a fall in revenue, but also narrow operating margin for the nation’s largest mall developer.

Cement Makers

A decline in sales volume and realisations over last year is expected to weigh on cement makers’ margins in the quarter ended March.

Radico Khaitan

The maker of Magic Moments vodka may see a contraction in margin on account of higher prices of extra neutral alcohol—a key raw material to make alcoholic beverages, sanitizers, and spirits—over last year.

Page Industries

Lower volumes, rise in raw material costs, higher discounting and schemes to boost sales are expected to weigh on the margin of the maker of Jockey underwear and Speedo swimwear. But some of the negatives are likely to be offset by a reduction in overhead spends, including ad spends and implementation of IND AS-116 accounting standards.

(The reasons are compiled from the research reports of Kotak Securities, Spark Capital, Equirus Securities, Emkay Research, Nirmal Bang, Elara Capital, BOBCAPS and Ambit Capital, among others.)