Q1 Earnings: Here’s What Analysts Expect

A weakening rupee and a poor year-ago quarter when dealers pared stock ahead of the Goods and Services Tax will have a bearing on this earnings season that kicks off tomorrow.

Among the Nifty 50 companies, IndusInd Bank Ltd. and Tata Consultancy Services Ltd. will announce results for the three months ended June tomorrow. Software services provider Infosys Ltd. will release its financials on Friday.

In the previous quarter ended March, fast-moving consumer goods, metals and construction had beaten estimates while auto, oil and pharma companies missed forecasts. Analysts are upbeat on automobiles in the June quarter, but expect pharmaceutical companies to continue facing challenges in the U.S.—their largest market.

Most brokerages expect a 20-22 percent growth in earnings per share of the Nifty 50 companies in the three months ended June. Kotak Securities is relatively conservative, with a 12 percent growth forecast.

Overall, it would be the third consecutive quarter of double-digit growth. While the earlier two quarters had benefited from low-base effect following demonetisation in the corresponding year-ago period, this quarter will reaffirm a sustained pickup in demand in most consumption-linked sectors, according to CRISIL Research.

“The performance would be in line with our estimate of double-digit growth for the whole of fiscal 2019, with 15 of the 21 key sectors expected to log growth above 10 percent this time,” Prasad Koparkar, senior director at the research firm said. “The pick-up in volumes is expected to have sustained in both consumption- and commodity-linked sectors.”

Here’s what brokerages expect in the first quarter ended June:

Automobiles

• The sector will benefit from low base of last year.
• Strong rural demand and healthy growth in overseas sales.

Information Technology

• Rupee depreciation to help the IT sector.
• Historically first and second quarters are strongest for IT firms.
• No major changes to guidance given by IT companies.

Cement

• Higher input costs in terms of power and freight will impact profitability.
• Demand likely to be strong, aided by volume growth.

Financials

• Asset quality improvement in the fourth quarter is likely to continue.
• Higher bond yields may impact public sector banks mainly.
• Retail-focused banks and non-banking financial companies will outperform the corporate-focused lenders.

FMCG

• Stabilisation in trade channel and consumer demand recovery.
• Margin expansion will continue due to benign input prices.

Pharmaceuticals

• Will continue to see pricing pressure in the U.S. market.
• Domestic business will continue to drive earnings.
• MNC pharma firms will continue to outperform.

Capital Goods And Infrastructure

• Order inflow and execution remains weak for most companies.
• Road construction companies will report strong financials on strong order flow.

Metals

• Strong growth on commodity prices and increasing demand.
• Trade war and the rising dollar are concerns for mining companies.

Oil & Gas

• Upstream companies to benefit from higher crude prices.
• Oil marketing companies will be impacted by weaker gross refining margins and rupee.

Telecom

• Competitive dynamics in the sector will lead to weak earnings.

Media And Entertainment

• Strong advertising traction due to strong spends by FMCG companies.
• Muted quarters from cinema companies due to lack of blockbusters.

Earnings estimates have been compiled from Kotak Securities, Antique Stock Broking, Deutsche Bank, JPMorgan, Edelweiss Financial and ICICI Direct reports.