Q3 Results: 10 Mid-Cap Stocks To Watch Out For This Earnings Season
Men look up at an electronic ticker board that indicates stock figures at the Bombay Stock Exchange (BSE) in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Q3 Results: 10 Mid-Cap Stocks To Watch Out For This Earnings Season

Weak demand amid a slowing economy may weigh on the earnings of mid-sized companies in the quarter ended December.

That comes despite a boost from the festive season and an above-normal monsoon. While the cut in corporate tax rates last year may aid companies’ profits, analysts expect growth to be led largely by the financial sector.

Here are the mid-cap stocks that, according to forecasts of analysts tracked by Bloomberg, may report the highest margin expansion and contraction in the ongoing earnings season.

Selection Criteria

  • Market value less than Rs 20,000 crore.
  • Rated by at least 10 analysts.

Also read: Q3 Earnings Preview: India Inc. May Face Another Tough Quarter As Slowdown Persists

Vodafone Idea

Higher revenue due to lower subscriber churn, increased broadband subscriber addition and price hikes, along with the benefit from the Ind AS-116 accounting standard, may aid the beleaguered mobile operator’s margin. The company hiked tariffs by an average 30 percent in December. It also expects operational benefits on the back of fewer towers and savings accruing due to merger between Vodafone India Ltd. and Idea Cellular Ltd.

Multiplexes

Robust box-office collections, strong growth in the high-margin food and beverage segment led by higher volumes, price hikes and implementation of Ind AS-116 is expected to aid margins. Despite fewer Bollywood releases, the combined revenue growth of PVR Ltd. and Inox Leisure Ltd. is projected at 20 percent—driven by big-budget movies.

Future Retail

India’s second-largest brick-and-mortar retailer’s margin may be boosted by the festive season, its Easyday chain achieving break-even as it shuttered non-profitable stores, robust same-store sales growth led by Big Bazaar and implementation of Ind AS-116. Big Bazaar’s performance is also expected to benefit from its sales agreement with Amazon. com Inc.

Ajanta Pharma

Strong traction in the domestic and U.S. businesses, a low base of the previous year and higher operating leverage may aid the drugmaker’s margin in the December quarter. A pick-up in its institutional or tender business in Africa—under which it makes drugs on contract for governments and other institutions—will also help.

Natco Pharma

Lower domestic sales and a high-base effect from better sales in the U.S. are expected to weigh on Natco Pharma Ltd.’s margin. Lower traction in its oncology range and muted sales of its Hepatitis C drug may result in a decline in domestic business, while a higher base in the U.S. and intense competition in the market for gCopaxone, a therapy for multiple sclerosis, and the testosterone gel Androgel AG would further affect growth.

Jindal Steel & Power

Jindal Steel & Power Ltd.’s operating margin may decline on lower realisation in its steel business and lower plant utilisation in its power business. Realisation may fall on the back of a decline in steel prices, higher exports and relatively lower proportion of value-added products. Power plant utilisation may drop due to subdued demand and coal availability problems.

IRB Infrastructure

IRB Infrastructure Developers Ltd.’s margin would be affected by weaker revenue growth over the previous year and an adverse revenue mix. Its toll revenue is expected to be affected as the concession period for the Mumbai-Pune expressway ended in August 2019. That would also result in a higher revenue share from its low-margin construction business.

Cement Stocks

Weak demand and decline in cement prices will weigh on the operating margin of cement makers. All-India cement prices, according to analysts’ estimates, declined 3 percent over the previous year, while volume growth is expected to be lower due to weak demand in October and November on account of weak construction activity due to unseasonal rains, low government spending and liquidity constraints.

(The reasons have been compiled from research reports of Kotak Securities, Motilal Oswal, Spark Capital, Anand Rathi, SBICAP Securities, Antique Stock Broking, among others.)

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