Cogencis Poll: Weak demand to keep sales growth of cos muted Oct-Dec

Friday, Jan 10, 2020


By Nikita Periwal


MUMBAI – The performance of Nifty 50 companies in the December quarter will continue to be weighed down by a slowing economy, as sales growth remains weak and profits are propped up by the cut in tax rates and sturdy earnings from banks and other financial services companies.


Though Nifty 50 companies realised most of the benefits of a reduction in corporate tax rates to 22% from 30% in the September quarter itself, several adjustments are expected in the December quarter too.


This is why it will be important to scrutinise the operating profits and sales of companies and their commentary on how they see demand for the last quarter of 2019-20 (Apr-Mar), analysts said, especially because GDP growth for the year is seen falling to an 11-year low of 5.0%.


Seen as the lowest GDP growth since 3.1% in 2008-09, the year of the global financial crisis, the slowdown will continue to keep double-digit growth in earnings elusive as most sectors linked to growth in the local economy continue to suffer.


The cumulative sales of companies, which are a part of the Nifty 50, are seen flat on year in the December quarter, an average of estimates from 20 brokerages compiled by Cogencis showed. Sequentially, sales are seen rising 8%.


"Overall demand scenario remains muted and various stimulus measures have failed to show impact on demand so far. 3Q will also show impact of CAA (Citizenship Amendment Act) protests led economic disruptions," brokerage Prabhudas Lilladher said in its pre-earnings report.


Though rising crop prices and good sowing in the rabi season have raised expectations of demand–particularly from rural areas–rising in the current quarter, it remains to be seen whether companies also concur with this view.


Profits of companies for the December quarter are expected to surge by 60% on year spearheaded by banks and non-banking financial companies, estimates showed.


The aggregate net profit of banks in the Nifty 50–Axis Bank, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, State Bank of India, IndusInd Bank and YES Bank–is seen jumping 35% on year helped by the resolution of large stressed assets, moderation in overall slippages, and better-than-expected performance from retail-centric players.


The profits of Bajaj Finance, Bajaj Finserv and Housing Development Finance Corp are seen surging 118% on year because of an improvement in demand in the festival season, which led to a higher credit offtake.


A steady 8% sales growth and 20% on-year jump in profits of Britannia Industries, Hindustan Unilever, Nestle India and ITC will be the other pocket of relief in earnings, even as the guidance from these companies remains crucial given that their volume growth has been faltering.


Even though the sales of the top five technology companies is seen growing 8% on year, profits are expected to grow a mere 3% as higher operating costs impact profitability. Their commentary, though, is seen turning even more cautious as they factor in a delay in deal closures and lower spending in the US ahead of the 2020 presidential election.


Sector major Infosys, which is scheduled to announce its earnings later today, is seen moving towards its double-digit sales growth target for 2019-20 (Apr-Mar) with even more optimism, as it is expected to raise its guidance for the third quarter in a row.


Sectors that will keep a lid on growth in profits include metals and automobiles.


Even as sales decline 14% on year, the net profits of Hindalco Industries, JSW Steel, Tata Steel and Vedanta are seen falling sharply by 71% on year because of weak realisations, which is seen affecting the profitability of these companies, and in turn, their bottomline.


Both the sales and profit of automobile majors are seen subdued on year, even as they see a marked recovery sequentially. These include Bajaj Auto, Eicher Motors, Hero MotoCorp, Mahindra & Mahindra, Maruti Suzuki India and Tata Motors.


Infrastructure major Larsen & Toubro, which is often used as a proxy for the state of capital formation in the country, is seen reporting a 15% growth in profit on the back of a 9% growth in sales, but will be under pressure if its order inflows have not picked up in a big way in the December quarter.


"Watch out for execution trend and outlook on some big ticket size orders," Motilal Oswal Securities said of the index heavyweight.


Oil-to-telecom conglomerate Reliance Industries, the largest Indian company by market capitalisation, is seen reporting flat sales on year, but its profits are seen jumping more than 15% on year on a consolidated basis helped by higher refining margins, increased contribution from its telecom arm, and sustained growth from its retail segment.


Following are the Oct-Dec consensus earnings estimates of companies that constitute the National Stock Exchange's Nifty 50 index. These estimates are based on reports compiled by Cogencis from 20 brokerage houses.


Company name  Sales       PAT  Sales    PAT  Sales    PAT    EBITDA  Result
 ——Average——-—–(Y-o-Y)—–—–(Q-o-Q)—–mln Rupees    date
 —–mln Rupees—–————–% Change————–  
Bajaj Auto78,43412,2788115(12)13,007Jan 30
Eicher Motors +24,0355,0333(6)11(12)6,148      —
Hero MotoCorp69,5247,283(12)(5)(8)(17)9,636Feb 06
M&M123,97610,728(5)(0)12(12)16,995      —
Maruti Suzuki216,65516,9571414342523,557      —
Tata Motors +756,27212,901(1)     N.A.17     N.A.89,630      —
Total1,268,89565,1791     N.A.1625  
AXIS Bank *64,14920,80614245     N.A.      N.A.Jan 22
HDFC Bank *142,12370,0551325510      N.A.Jan 18
ICICI Bank *84,53740,983231555526      N.A.Jan 25
Kotak Mahindra *34,78116,81118304(3)      N.A.Jan 20
SBI *257,29051,3571330571      N.A.      —
IndusInd Bank*30,39614,076334342      N.A.Jan 14
Yes Bank*19,957(11,881)     N.A.     N.A.(9)     N.A.      N.A.      —
Grasim Industries46,7573,275(12)(46)(3)(38)6,588      —
UltraTech Cement +102,2586,930107662019,344Jan 24
UPL +92,7626,75089461965819,202      —
L&T +390,86623,71691611(6)43,339Jan 22
Bajaj Finance*40,56716,4801612720      N.A.Jan 29
Bajaj Finserv +*13,73511,749(3)3823(2)      N.A.Jan 29
HDFC *31,93062,2046194457      N.A.Jan 27
Britannia Industries +30,1263,578719(0)(11)4,772      —
Hindustan Unilever 100,39416,3537133(12)22,993      —
Nestle India31,8764,9911146(0)(16)7,205Feb 13
ITC119,84738,6488202(4)46,850      —
HCL Tech +180,86227,6451563243,361Jan 17
Infosys +232,00542,1358173559,034Jan 10
TCS +398,33481,8677122106,960      —
Tech Mahindra +94,28310,0475(16)4(11)15,418Jan 31
Wipro +154,17524,6742(2)2(3)31,411Jan 14
Titan Co63,8854,796     N.A.     N.A.46506,858Feb 04
Total63,8854,796     N.A.     N.A.4650  
Zee Entertainment +21,1174,278(3)(24)(0)46,098      —
Hindalco Industries105,3142,004(12)(19)615710,366      —
JSW Steel +160,6236,876(19)(58)(4)(73)30,732Jan 24
Tata Steel +346,2811,434(9)(94)2(97)44,056      —
Vedanta +191,0696,243(18)(60)(12)(71)47,985      —
OIL & GAS        
BPCL723,17115,502(9)21312(9)29,252      —
GAIL 187,07712,776(5)(24)42020,892      —
Indian Oil Corp1,294,85728,627(7)2991640868,070Jan 30
ONGC241,55058,769(13)(29)(1)(6)124,617      —
Reliance Ind946,042100,299(5)1293141,689Jan 17
Cipla +42,9814,21210271(11)8,113Feb 05
Dr. Reddy's Lab +41,9614,57211(9)5(59)8,848Jan 27
Sun Pharma +81,91910,8307(13)3217,078      —
POWER & ENERGY        
NTPC 240,88928,902(0)216(11)69,967      —
Coal India +231,65741,334(1)(9)221754,857      —
Power Grid90,43425,422794180,576      —
Bharti Airtel +218,811(3,414)8     N.A.4     N.A.91,232      —
Bharti Infratel +36,2217,862(0)21(0)(18)17,743      —
Total255,0334,4487(39)3     N.A.  
Asian Paints +57,0437,59682013(8)11,539Jan 22
Adani Ports and SEZ +32,35711,60115(18)151019,756      —
Nifty Total9,318,1631,028,947(0)60839  


+ Consolidated Figure 
* Net interest Income 
Y-o-Y: Year-on-Year 
Q-o-Q: Quarter-on-Quarter
N.A.: Not Available 
Rs: Rupees 
Estimates from: 

Antique Stock Broking Ltd, Axis Capital, Centrum Broking Ltd, Dolat Capital Market Pvt Ltd, Edelweiss Securities Ltd, Emkay Global Financial Services Ltd, HDFC Securities Ltd, ICICI Research, ICICI Securities Ltd, IDBI Capital Market Services Ltd, JM Financial Institutional Securities Pvt Ltd, Kotak Institutional Equities, Motilal Oswal Securities Ltd, Narnolia Financial Advisors Ltd, Nirmal Bang Equities Pvt Ltd, Nomura Equity Research, PhillipCapital (India) Pvt Ltd, Prabhudas Lilladher Pvt Ltd, Reliance Securities and Sharekhan Ltd.






Compiled by Mukesh Saroj

Edited by Shirsha Thakur


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