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All You Need To Know Going Into Fourth-Quarter Earnings Season

TCS and Infosys will kick off the March-quarter earnings season for Nifty 50 companies on April 12.



A customer holds Indian rupee notes at a store (Photographer: Dhiraj Singh/Bloomberg)
A customer holds Indian rupee notes at a store (Photographer: Dhiraj Singh/Bloomberg)

India Inc.’s fourth quarter is expected to remain mixed due to a stronger rupee, weak base, higher raw material prices and a slowdown in demand for automakers.

The Nifty 50 companies will announce their earnings for the quarter ended March starting with Tata Consultancy Services Ltd. and Infosys Ltd. on April 12.

The index constituents reported an aggregate earnings per share of Rs 97 in the three months ended December, missing the consensus estimate by 19 percent. That’s mainly because of the Rs 27,000-crore loss of Tata Motors Ltd.—the biggest in India’s corporate history. Overall, 41 companies either met or beat estimates in the October-December period—the highest in at least six quarters.

The analysts estimate an aggregate EPS of Rs 137.3 apiece for the quarter ended March.

Key Trends

  • Growth in the earnings of Nifty 50 companies will be led by the weak base effect of last year.
  • Information technology and pharmaceutical stocks to may face currency headwinds due to dollar movement.
  • Higher raw material prices may impact the metal sector.
  • The auto sector continues to witness a slowdown in demand.

Here’s how the sectors are expected to perform in the March quarter:

Agriculture

  • Strong growth in Latin America and a global pick-up in agrochemical demand to aid UPL Ltd.

Aviation

Automobile

  • Volume growth has been tepid for both passenger vehicles and two-wheelers.
  • Regulatory changes, rising fuel prices and insurance-related increased upfront cost and higher discounts impacted sales and margin.
  • Auto ancillary and tyremakers also impacted due to slowdown in auto demand.
  • Strong replacement demand will benefit battery makers.

Financial Services

  • Larger private sector banks may continue to report robust growth.
  • Stress in housing finance companies may reflect on their financials this quarter.
  • Strong growth momentum of non-bank lenders is likely to continue.
  • Asset quality of banks will improve further.
  • Need to watch out for companies with more IL&FS provisioning.
  • Track the impact of auto slowdown for vehicle financiers.

Cement

  • Cement makers across India have been able to hike prices in the fourth quarter.
  • Likely to report higher growth aided by lower costs and increased realisations.
  • Producers with higher exposure to the south India should benefit most from price hikes.

Construction And Capital Goods

  • Strong orderbook to aid revenue of engineering, procurement and construction companies
  • International orders to compensate order flow for capital goods companies.
  • Private capex yet to pick up; central government’s order flow stopped due to elections.

Information Technology

  • Deal momentum will drive revenue of IT companies despite moderate currency headwinds.
  • Margin to remain under pressure due to rising employee/subcontractor costs.
  • FY20 revenue guidance expected to remain stable; moderation likely in margin guidance.

Oil & Gas

  • Strong marketing margin and possible inventory gains for oil marketers.
  • Upstream companies to benefit from rising crude prices.
  • GAIL (India) Ltd.’s earnings are expected to fall due to weak performance of its gas trading segment.

Telecom

Fast-Moving Consumer Goods

  • Volumes to see moderation after a few strong quarters in the past.
  • Rural growth expected to continue to outpace urban.
  • Operating margin to continue to benefit from cost optimisation.
  • No significant change in gross margin.
  • Monsoon rains are key.

Paint

  • Low double-digit volume growth in domestic decorative paints business.
  • Kansai Nerolac Paints Ltd. may be impacted due to higher exposure to the auto sector.
  • Price hikes and moderation in input cost to keep margins steady.

Pharmaceuticals

  • Lack of new launches will impact the overall sector.
  • Late surge in flu cases to aid growth; but pricing pressure persists.
  • Makers of active pharmaceutical ingredients will benefit as China shut toxic-spewing factories causing a supply crunch.

Metals

  • Lower global base metal prices to impact finances.
  • Lower prices and muted demand will impact financials of steelmakers.
  • Non-ferrous metal companies will benefit from easing cost pressures.

Media

  • Strong quarter for multiplex on the back of several movies released.
  • New TRAI order to impact financials of DTH and broadcasters.
  • Advertisement and subscription revenues expected to fall.