As you may be just buckling up for another weak April-June quarter corporate earnings, hold on! There may be stocks that still has the potential to surprise positively. Some sectors like media & entertainment and telecom are what analysts feel will show some positive respite in this quarter.
Amid generally weak sales performance, sectors that are likely be stronger are IT (14 percent), pharma (12 percent), media & entertainment (12 percent) and retail (10 percent), says Emkay. Power sector followed by telecommunications are expected to reflect sharpest improvement in EBITDA margin expansion by 432 basis points (bps) and 168 (bps) respectively.
Among Tier II IT companies, Emkay expects good revenue performance from eClerx and Hexaware. Mindtree is also expected to report a strong sequential USD revenue growth in June 2014 aided by full quarter consolidation of the Discoveture acquisition.
However, few IT companies like Tech Mahindra, Persistent and KPIT Technologies have already issued a warning note that Q1FY16 may face some headwinds in dollar revenue earnings.
Some of the few stocks that Emkay is looking for a positive surprise in earnings are India Cements, HPCL, Shoppers Stop, PVR and Ramco Cements.
According to CRISIL estimates, export-oriented sectors and some domestic consumption-driven sectors (such as retail, FMCG, and media) will be the topline outperformers as export-oriented companies are partly aided by the recent weakness in rupee. Telecom is another sector that it is betting on as surge in data revenues and control over operating expenses may boost EBITDA margins of these companies by 120 bps.
“Telecom and FMCG sectors are expected to register a revenue growth of 10-12 percent and 6-8 percent respectively. The operating metrics continue to improve and data services is expected to witness a significant increase in usage in the telecom sector, while in the FMCG sector, the revenue growth will primarily come from higher realisations,” it says in a report.
Meanwhile, Bank of America Merill see telecom, banks and energy showing strong growth. Among Sensex companies Cipla, BHEL,ONGC, HDFC Bank and Bharti are expected to be the key growth drivers.
However, Edelweiss says private banks (HDFC Bank, Axis Bank and ICICI Bank), Cipla and Maruti Suzuki are expected to post healthy top-line growth of more than 15 percent on an annual basis. The brokerage is betting on engineering and capital goods to post double-digit profit growth.