Q2 earnings review: Hits, misses and the road ahead

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Q2 earnings review: Hits, misses and the road ahead

As the earnings season for Q2 draws to a close, Moneycontrol brings you a comprehensive review, with a peek into what will happen next.

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ALSO READ News and Notices about Hind Constr See interviews with Hind Constr Management See what other Experts & Brokerages are saying about Hind Constr See previous Results of Hind Constr Nifty BSE | NSE 31/05/12 Are Mutual Funds betting on Nifty? Other Stocks in this news Bharat Heavy Electricals | IVRCL | Punj Lloyd | Jaiprakash Associates | Larsen and Toubro |

Information Technology

It has clearly been a beat-and-increase-the-guidance kind of quarter. Taking cues from the top five IT majors, things seem to be stabilizing with good volume growth. Energy, utilities and retail itself came as a surprise in the kind of quarter-on-quarter growth seen. Cost and currency pricing was more or less stable and very little in terms of pricing pressure which the managements had indicated.

Not only sector majors even mid-cap IT firms are reaping the benefits of a recovery in the economy with clients increasing IT spends and the pricing environment stabilising.

Medium sized IT companies have grown despite the pressures of an economic downturn. Similar to their larger peers, most midcap IT companies have delivered sequential growth and are cautiously optimistic about the future.

Real Estate

Developers may have been gung-ho about an increase in sale volumes, but the second quarter performance for the real estate sector is far from euphoric. Posting a marginal increase in revenues quarter-on-quarter, companies continue to focus on fund raising and reduction of debt.

Since Q1 of the current financial year, realty prices have been on the upswing, with some companies revising prices upwards by 20-30%. But that has not stopped them from clocking in better sales quarter-on-quarter.

Capital Goods

Capital goods companies in Q2 FY10 have been largely below street estimates. Although HCC and BHEL seem to have delivered in line with street expectations, others like IVRCL , Punj Lloyd , JP Associates , and L&T have disappointed

The main problem seems to be execution, which was definitely below street expectations.
Though the order inflow has picked up, most of these huge value orders that were received by these companies will start yielding into revenues only from the end of FY10, or the beginning of FY11 onwards. Most companies have tried to repay part of their high cost debt. However, interest cost still seems to be a pressure point for most of these companies.

Telecommunication

It is a de-rating time for Indian telecom companies. Revenues and profitability have taken a hit and dwindling subscriber spends did help either. It seems the per-second billing has knocked off the pulse of the telecom sector. The dual SIM phenomena is impacting customer spends. Subscribers are choosing to use a second SIM card to benefit from discounts.

If last quarter was marked by the impact of interconnect fees, the pulse phenomena has clearly hurt numbers this quarter.