The corporate earnings have been muted throughout the year and are expected to be tepid in the near to medium-term as well, says Siddhartha Khemka, Head – Retail Research, Motilal Oswal.
The festive cheer was visible on D-Street in the last hour of the trading session as bulls helped the market to reverse losses. The Sensex recouped losses, rising 37 points to 39,058; while the Nifty closed 1.30 point higher at 11,583.
For the week, the Nifty closed flat with negative bias down 0.75 percent while the Sensex fell 0.6 percent for the week ended October 25. Experts feel that in the coming week a lot of action will be centred on banking stocks. After stellar numbers from State Bank of India, more PSBs will declare their results in the coming week.
Corporate earnings have been muted throughout the year and are expected to be tepid in the near to medium-term as well. Earnings risks continue to be tilted to the downside on account of the underlying weak demand scenario, the uneven asset quality trends in financials and the deflationary trends in commodity prices.
"For 2QFY20, we expect Nifty sales/PAT to decline by 2-8 percent. The silver lining is that the festive season demand has begun on a positive note. Thus while we are expecting 12 percent EPS growth in FY20 for Nifty, we are estimating a strong revival of 28 percent growth in FY21," said Siddhartha Khemka, Head – Retail Research, Motilal Oswal.
Below are the top 10 companies which have declared September quarter results this week:
SBI: Profit jumps three-fold YoY
Country's largest lender SBI reported more than 3x increase year-on-year (YoY) in the second-quarter profit despite higher provisions, with improvement in asset quality. Profit increased to Rs 3,012 crore compared to Rs 944.87 crore in same period last year.
Asset quality improved sequentially as well as YoY. Gross non-performing assets (NPA) as a percentage of gross advances fell 34bps quarter-on-quarter (QoQ) to 7.19 percent and net NPAs dropped 28bps QoQ to 2.79 percent in the quarter ended September 2019.
Maruti Suzuki: Profit declines 39.4% YoY
Maruti Suzuki India, the country's largest car manufacturer, registered a massive 39.4 percent YoY decline in profit due to weak auto sales amid subdued demand in the economy.
The profit declined to Rs 1,358.6 crore in the quarter ended in September from Rs 2,240.4 crore in the same period in 2018. A sharp fall in corporate tax expenses (as the company enjoyed the maximum benefits because of the corporate tax rate cut announced by the government in September) and higher other income helped the company limit the profit decline.
"Net profit fell on account of lower sales volume, higher sales promotion expenses and higher depreciation expenses, partially offset by cost reduction efforts, higher fair value gains on invested surplus and reduction in the corporate tax rate," Maruti said in a BSE filing.
Tata Motors: Profit falls 79% YoY
Tata Motors reported a 79 percent YoY fall in its net loss at Rs 216.6 for the September quarter of FY20 on October 25. A CNBC TV18 poll had expected Tata Motors to report a loss of Rs 990 crore for Q2FY20. The company had reported a net loss of Rs 1,048.80 crore in the corresponding quarter of the last financial year.
The company’s British luxury arm Jaguar Land Rover posted a pre-tax loss of 395 million pounds. The group’s consolidated revenue came in at Rs 65,432 crore, lower than Rs 71,981.08 crore in the same quarter last year.
The sales number, however, was higher than the CNBC TV18 poll estimate of Rs 63,434 crore. Consolidated EBITDA came at Rs 7,045 crore against the CNBC-TV18 poll of Rs 5,401 crore, while consolidated EBITDA margin stood at 10.8 percent.
The company said growth continues to be impacted by subdued demand, higher axle loads, liquidity stress, low freight availability for cargo operators and general economic slowdown.
However, the performance of the Jaguar Land Rover improved during Q2FY20 as the revenue of this segment improved 8 percent to 6 billion pounds.
Jaguar's EBITDA margin stood at 13.8 percent which is among the highest in the last 16 quarters, the company claimed. EBIT margin came at 4.8 percent. "For the financial year ending March 31, 2020, Jaguar Land Rover continues to expect YoY improvement and to target a 3-4 percent EBIT margin with cash flow increased over last year," Tata Motors said.
ITC: Beats Street estimates
ITC reported better-than-expected 36.16 percent YoY jump in its standalone net profit at Rs 4,023.1 crore for the September quarter.
Cigarette EBIT rose 7.41 percent YoY, coming at Rs 3,844.4 crore against Rs 3,579.1 crore in the year-ago period. Cigarette revenue climbed about 6 percent YoY to Rs 5,326.8 crore in Q2FY20 against Rs 5,026.1 crore in Q2FY19
Brokerage firms maintain their ratings on ITC while Emkay Global raised the target price to Rs 274 from Rs 267 earlier. The most aggressive target price of Rs 376 on ITC was put out by Macquarie, which translates into a rise of more than 50 percent from October 24 closing of Rs 248.95.
Asian Paints: Profit jumps 67% YoY
Asian Paints reported a 67.5 percent YoY rise in consolidated net profit at Rs 823.41 crore for the September quarter. The company had reported a profit of Rs 491.58 crore in the same quarter last year.
Consolidated revenue for the quarter rose 9.4 percent to Rs 5,050.66 crore compared with Rs 4,615.49 crore in the corresponding quarter last year. PBIDT for the quarter jumped 13 per cent to Rs 954.82 crore, the paints company said in a BSE filing.
Hero MotoCorp: Slowdown in auto sales bites
Hero MotoCorp posted a fall in September quarter earnings on October 23 as revenue from operations declined 16.72 percent YoY to Rs 7,570.70 crore in Q2FY20 amid a slowdown in auto sales as the industry is going through a difficult phase.
The company reported a one-time loss of Rs 60.11 crore on account of provisions for a voluntary retirement scheme (VRS).
"During the current quarter ended September 2019, the company has introduced VRS and considered a provision of Rs 60.11 crore for employees who have accepted VRS, as an exceptional item in the standalone financial results," it said.
Earnings before interest, tax, depreciation and amortization (EBITDA) for the quarter stood at Rs 1,101 crore. This reflects EBITDA margin of 14.5 percent in the quarter ending September 2019 against 14.4 percent in the June quarter and 15.2 in the September quarter in fiscal 2019.
Bajaj Auto: Profit rises 22% to Rs 1,402 crore
Bajaj Auto reported better-than-expected earnings for the quarter ended September 30 wherein profit rose 22 percent to Rs 1,402 crore, aided by a tax expense reversal of Rs 182 crore due to the recent lowering of the corporate tax rate.
Revenue from operations dipped 4 percent YoY to Rs 7,707 crore. Total volumes during the quarter dipped 12 percent to 1,173,591 units as compared to 1,339,444 units in the same quarter of the previous quarter.
"Q2 was a difficult quarter for the domestic motorcycle industry. In retail terms, the decline was 14 percent ( in billing terms, the decline was 21 percent). Performance of Bajaj Auto was in line with the industry; retail market share at about 20 percent," Bajaj Auto said in a statement.
Axis Bank: Sept quarter loss of Rs 112 crore
Axis Bank reported a loss of Rs 112 crore for the quarter ending September 30, due to a one-time hit of Rs 2,138 crore. "The hit that we have taken is because of the restatement of DTA. With tax rates reduced, the entire DTA has to be restated at 25 percent instead of 35 percent," said Jairam Sridharan, group executive and chief financial officer, Axis Bank.
Asset quality improved as the bank wrote off Rs 3,104 crore in the second quarter of FY20. Gross NPAs stood at 5.03 percent in the September quarter compared with 5.25 percent in the quarter before. The bank added fresh bad loans worth Rs 4,983 crore in the second quarter compared to Rs 4,798 crore in the previous quarter. Corporate slippages stood at Rs 2,862 crore.
Kotak Mahindra Bank: Profit grows 51% on lower tax rates
The bank reported profit growth of 51 percent in the quarter ended in September YoY due to lower tax rates, and the net interest income jumped 25.2 percent YoY, with the loan growth at 15 percent YoY. The bank's net interest margin improved to 4.61 percent in Q2FY20 from 4.49 percent in the previous quarter.
Asset quality weakened in the September quarter with gross NPAs (as a percentage of gross advances) rising 13 bps sequentially to 2.32 percent and the net NPA climbing 12 bps QoQ to 0.85 percent in Q2.
Credit Suisse has maintained its neutral rating on the stock but raised target price to Rs 1,450 from Rs 1,340 per share as growth slowed further though tax cuts and NIMs boosted earnings.
Bajaj Finserv: Profit jumps 71%
Bajaj Finserv (BFS) has reported a 71 percent jump in its consolidated net profit to Rs 1,204 crore in the second quarter of the current fiscal. The company had posted a net profit of Rs 704 crore in the corresponding July-September quarter of the previous fiscal ended on March 2019.
Total income rose by 47 percent to Rs 14,224 crore during the reported quarter of 2019-20, as against Rs 9,698 crore a year-ago period, Bajaj Finserv said in a release.
BFS is the holding company for the various financial services businesses under the Bajaj group. It has 54.81 percent holding in Bajaj Finance.
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