Q2 Results: 10 Mid-Cap Stocks To Watch Out This Earnings Season

Analysts expect margins of cement makers and media companies to expand during the three months ended September, while margins of steel and pharma companies are expected to contract during the period due to lower prices and lack of new launches in the U.S. market, respectively.

Here are the mid-cap stocks, according to analyst forecasts tracked by Bloomberg, that may report the highest margin expansion and contraction in the July-September period.

Methodology

• Market capitalisation less than Rs 15,000 crore.
• More than 10 analysts ratings.

Five Stocks Expected To Witness Highest Jump In Margin

Orient Cement

Modest volume growth, higher cement prices compared to last year and lower fuel cost is expected to aid Orient Cement Ltd.’s operating margins. Fuel costs which account for more than one-fourth of the total cost for the company is expected to be lower due to lower pet coke and coal prices.

PVR

Robust box office collections, screen additions, consolidation of SPI Cinemas and strong growth in the food and beverage segment is expected to aid the company’s margins. A strong performance from movies such as Mission Mangal, The Lion King, Saaho, Super 30, Chhichhore, Dream Girl, etc. led to robust box office collections, while the company added 19 screens during the quarter. The food and beverage segment is a high margin segment and is expected to grow double-digit on the back of higher volumes.

Gujarat Gas

Higher volumes and lower raw material prices will aid India’s largest city gas distributors’ margins. Volumes are expected to be higher due to a rise in demand from tilemakers in Morbi—India’s largest ceramic manufacturing hub—after a ban on coal-based units. A 57 percent drop in spot liquified natural gas prices—raw material—could lead to more than 500 basis points growth in operating margins.

DB Corp & Jagran Prakashan

Despite an expected fall in revenue, both the companies are likely to report margin expansion due to a decline in newsprint costs. DB Corp and Jagran Prakashan Ltd. are expected to report a 2 percent decline in revenue due to weakness in key categories such as auto, slowdown in rural consumption, heavy monsoon, floods in a few states and post-election lull in government/political ad spends. However, a 30 percent decline in newsprint cost from its peak will aid margins.

Five Stocks Expected To Witness Biggest Decline In Margin

SAIL

India’s largest state-run steelmaker is likely to see about 10 percentage point decline in its operating margin. This would be due to lower steel prices and falling spreads for steelmakers. Higher input prices of coke and iron ore—both of which are key raw materials—would lead to lower spreads and lower margins.

SKF India

Slowdown in the auto sector and lower operating leverage due to decline in sales volume will not only drag down the top line this time compared to last year, but also lead to lower margin. Kotak Securities expects a 5 percent decline in sales for the export segment which would further hit the company’s operating performance.

Glenmark Pharma

Analysts believe that lack of new launches in the U.S. markets coupled with price erosion in existing products are likely to hit the drugmaker’s second-quarter earnings. On the other hand, higher employee benefit expenses and bonus payouts are also key factors which might lead to lower margins on a yearly basis.

Alembic Pharma

Lower sales in the U.S. markets would be the key reason for lower margins in the second quarter of the ongoing fiscal. A one-time opportunity in the U.S. market had aided the overall margins during the same period last year. Alembic’s margins are expected to remain under pressure on a yearly basis despite better domestic sales expectations.

KNR Constructions

The monsoon-led slowdown in construction activity in the quarter is likely to impact growth for construction majors including KNR Constructions Ltd. Apart from this, a lower share of high-margin irrigation projects and lower tax incentives are also likely to eat into the company’s operating margins.