Q1 earnings: Nirmal Bang expects Bata, Allcargo to do well

All the listed companies will declare their April-June quarter results in July. In an interview to CNBC-TV18, Jignesh Kamani, research analyst at Nirmal Bang Institutional Equities says, midcap companies like Bata, Allcargo, JBF Industries and Arvind will do well.

Below is the edited transcript of his interview with CNBC-TV18's Latha Venkatesh and Gautam Broker. Also watch the accompanying video. Q: Is there any one sector that you think will be good? Which stocks are going to be good performers, surprising performers? A: Rather than sectors, it is more about company specific. Some companies may continue to remain weak. Among the midcap universe, which we keep track, Bata will continue to do very well in current performance. Allcargo will do reasonably well year-on-year. Companies like JBF Industries and Arvind will improve on sequential basis, though they will be lower from the yearly basis. They have weathered the storm between January to March quarter and are now gearing up for improvement in profitability. Q: Bata, what kind of earnings growth or revenue growth are you factoring in? What is your target price? A: Bata, we have target price of Rs 1,008. I expect that revenue will grow by close to 22-23% mainly on account of aggressive expansion. Last year, the company has opened close to 147 outlet and Q1 alone company has opened 61 outlets. So, on account of 10% volume growth and pricing mix, the company will continue to grow by 23% on revenue. We will witness 20 bps improvement in operating margin. Operating profit will be higher by 23% year-on-year. Net profits would grow by close to around 25% year-on-year. Q: What about something that you would advice investors to sellout before the results? I see you write Sintex won't do very well, any rational behind that, the monolithic will still be an overhang? A: If you talk about Sintex, Q3 and Q4 revenue and margin has deteriorated. We expect Q1 will see continuation that. If you take monolithic, which is 33% of the revenue, out of currently nine sites in India, seven sites have been in problem because of politics. The progress on that site is very low. Twenty percent of the revenue is coming from US and Europe operation. So, I expect that revenue will be lower in excess of around 15% and there will be pressure on margin. We expect pressure on stock price. Q: Would you want us to take us through the rationale for JBF Industries as well? A: JBF Industry, even in the current environment, last one year company has done reasonably well on the core profit level. Last year, the company had a forex loss of Rs 300 crore. Out of that Rs 158 crore was mainly on account of rupee-dollar and structure product worth of USD 20 million only on the loan amount. The company has repaid 80% of the principle this July. So, the quantum of forex loss, which was Rs 160 crore last year, will come down to just Rs 70 crore this year. That will boost up the profitability even assuming normal business will remain under pressure.