Corporate Q2 earnings are expected to be dull and may disappoint in some cases. Liquidity issues along with consumer spending slowdown could led to not so good Q2 growth numbers
The market delivered 3 percent return in the week ended October 18. This was backed by renewed FII inflow along with consistent DIIs money, government's initiative towards strategic disinvestments -- especially after stellar response to IRCTC, -- stable earnings and favourable global cues including the Brexit deal.
With a rally in two consecutive weeks, benchmark indices recouped all its losses seen in the week ended October 4. The BSE Sensex ended at 39,298.38 and the Nifty50 at 11,661.90.
Corporate Q2 earnings are expected to be dull and may disappoint in some cases. Liquidity issues along with consumer spending slowdown could led to not so good Q2 growth numbers.
"We may see some consolidation in Nifty after the recent surge while movement on the specific stocks would continue. In the absence of any major event, global cues and earnings will continue to dictate the market trend," said Ajit Mishra Vice President, Research, Religare Broking.
In Q2FY20, although corporates would have a lower base of profits, lower operating leverage in Q2FY20 would mean that margins may not show commensurate rise. A lot of these negative expectations are already in the price.
Corporate tax cuts will certainly lead to one-time adjustments and not upgrades.
However, at an aggregate level, revenues are expected to be slower on a YoY basis. But, this will not act as a deterrent suppressing the mood of Mr. Market. Markets should begin pricing in the revival of the economy given the stupendous government and Reserve Bank of India (RBI) initiatives in place, said Umesh Mehta, Head of Research, Samco Securities.
Here is a look at the top 10 companies which declared September quarter results last week:
Reliance Industries Q2 profit beats estimates, Jio registers healthy growth
RIL, the country's most valued company by market capitalisation, reported highest every quarterly consolidated profit in September quarter, driven by refining, telecom and retail segments. Higher other income and lower tax cost also boost the bottom line.
Mukesh Ambani-led Reliance Industries registered an 18.34 percent year-on-year growth in second-quarter consolidated profit to Rs 11,262 crore. The sequential increase was 11.46 percent.
Commenting on the results, Mukesh Ambani, Chairman and Managing Director said, "The company has reported record net profit for the quarter. These excellent results reflect the benefits of our integrated Oil to Chemicals (O2C) value chain and the rapid scale-up of our Consumer businesses. During this quarter, our O2C businesses gained from favourable fuel margins environment, feedstock sourcing flexibility and higher petrochemicals volumes."
Consolidated revenue during the quarter increased 3.63 percent to Rs 1,48,526 crore compared to the year-ago period, but the same declined 5.4 percent on a sequential basis. Earnings before interest, tax, depreciation and amortisation (EBITDA) increased 3.9 percent sequentially to Rs 22,152 crore and margin expanded by 130bps QoQ to 14.91 percent in the quarter ended September 2019.
Jio registered a healthy 11.1 percent sequential growth in the second-quarter profit at Rs 990 crore on revenue of Rs 12,354 crore that increased by 5.8 percent QoQ, boosted by Diwali plan.
HDFC Bank: Q2 profit jumps 27 percent to Rs 6,345 crore
Private sector lender HDFC Bank, on October 19 reported a healthy 26.75 percent year-on-year (YoY) growth in profit for the quarter that ended on September 2019 with stable asset quality.
Profit after tax for the quarter increased to Rs 6,345 crore against Rs 5,005.73 crore earned in the same period last year. The growth was driven by average asset growth of 15 percent and a core net interest margin for the quarter of 4.2 percent.
Net interest income during the quarter grew by 14.89 percent to Rs 13,515.04 crore YoY with loan growth at 19.5 percent as compared to same period last year. The bank said domestic advances grew by 20.7 percent with retail loans growth of 14.7 percent and wholesale at 27.9 percent YoY.
Hindustan Unilever meets Street expectations in Q2FY20; net profit jumps 21 percent
FMCG major Hindustan Unilever (HUL) on October 14 reported a 21 percent year-on-year (YoY) jump in its net profit at Rs 1,848 crore for July-September quarter of the financial year 2019-20 on the back of better volume growth. Earnings before interest, tax, depreciation and amortisation (EBITDA) came at Rs 2,443 crore, up 21 percent (16 percent on comparable basis after adjusting for accounting impact of Ind AS 116).
The domestic consumer segment grew by 7 percent with underlying Volume growth at 5 percent. Reported EBITDA improvement is 310 bps (200 bps on a comparable basis after adjusting for accounting impact of Ind AS 116 on leases), the company claimed.
"Amidst a challenging market environment, HUL has delivered another quarter of resilient performance and sustained margin improvement. Our focus on consumer value, excellence in execution and market development continues to serve us well," said Sanjiv Mehta, Chairman and Managing Director of the company.
Zee Entertainment Q2 profit rises 7 percent
Zee Entertainment Enterprises, on October 17, reported a 6.9 percent year-on-year growth (YoY) in September quarter profit at Rs 413.2 crore, impacted by slow revenue growth and weak operating margin. Profit for the quarter that ended on September last year stood at Rs 386.7 crore.
Revenue during the quarter grew by 7.4 percent to Rs 2,122 crore compared to same period last year due to lower-than-expected growth in advertising revenue (up 1.2 percent YoY) and subscription revenue (up 19 percent YoY). Advertising revenue growth was expected at 2-4 percent and subscription revenue growth at 25-26 percent for the quarter, according to a poll of analysts conducted by CNBC-TV18.
Wipro Q2 profit rises 7 percent QoQ
Software services provider Wipro reported a 7 percent sequential growth in second quarter profit at Rs 2,552.7 crore while the guidance for Q3 was ahead of analyst estimates. Profit in the quarter ended June 2019 stood at Rs 2,387.6 crore.
As the street generally follows the company's IT services business that grew by 2.1 percent quarter-on-quarter to Rs 14,656.1 crore in September quarter. IT services revenue in dollar terms increased 0.5 percent sequentially to $2,048.9 million while the same in constant currency grew 1.1 percent QoQ.
"We had a good in-quarter execution on both revenues and margins. The overall growth was broad-based with 6 out of 7 industry verticals growing on a YoY basis and we signed a large deal in India aligned to our strategy of taking global offerings to India customers," Abidali Z Neemuchwala, CEO and Managing Director said.
Ambuja Cements: Q3 net profit jumps 31 percent to 234.6 crore
Cement major Ambuja Cements reported 31.3 percent jump in its September quarter standalone net profit to Rs 234.6 crore aided by an improved margin and operating income. The standalone revenue was flat at Rs 2,626.1 crore against Rs 2,613.9 crore, year-on-year (YoY).
Earnings before interest, tax, depreciation and amortization (EBITDA) rose 22.8 percent at Rs 440 crore versus Rs 358.1 crore. The EBITDA margin was up 300 basis points at 16.7 percent against 13.7 percent. Cement realisations grew 5 percent YoY, while freight & forwarding costs reduced YoY on account of network optimization, contract re-negotiation and logistics efficiencies.
ICICI Lombard General Insurance: Q2 net profit up 5 percent
Private non-life insurer ICICI Lombard General Insurance posted a 5 percent year-on-year (YoY) increase in its September quarter (Q2) net profit at Rs 307.91 crore. The general insurer's underwriting loss came down significantly to Rs 8.75 crore compared to Rs 21.49 crore loss in the year-ago period. The combined ratio stood at 102.6 percent in Q2FY20 compared to 101.1 percent a year ago.
The gross direct premium income (GDPI) of the insurer stood at Rs 2,953 crore in Q2FY20, which was a 16.4 percent YoY drop. However, the insurer said that excluding the crop segment, GDPI increased by 14.5 percent YoY to Rs 2,898 crore in the September quarter.
In the post-earnings call, Bhargav Dasgupta, MD & CEO, ICICI Lombard said that they will want to maintain a 15-20 percent growth for their targeted non-crop segments in FY20.
Mindtree Q2: Net profit up 46 percent QoQ
Mindtree's Q2 FY20 consolidated net profit rose 45.6 percent quarter-on-quarter to Rs 135 crore on the back better operating income. Revenue increased 4.4 percent to Rs 1,914.3 crore, while dollar revenue rose 2.6 percent to $271 million. EBIT for the quarter stood at Rs 177.5 crore, up 51.5 percent, while EBIT margin saw a 290 bps increase to 9.3 percent.
“Our second quarter performance of double digit YoY revenue growth reflects our client centricity, our employees' winning spirit and our innovation," said its CEO Debashis Chatterjee. The board has declared an interim dividend of Rs 3 (30 percent) per equity share of par value Rs 10 each. The record date for payment of this interim dividend will be October 25.
TVS Motor posts 20 percent jump in profit
TVS Motor Company posted better numbers for the quarter ended September 2019. The company has reported a 20 percent jump in its Q2FY20 standalone net profit at Rs 255 crore against Rs 211.31 in the same quarter last year. Revenue of the company was down 13 percent at Rs 4,347.8 crore versus Rs 4,993.47 crore.
Meanwhile, earnings before interest, tax, depreciation and amortization (EBITDA) was down 10.8 percent at Rs 382 crore versus Rs 428.1 crore. The EBITDA margin was up at 8.8 percent against 8.6 percent, YoY.
DCB Bank Q2 profit grows 24.5 percent to Rs 91.4 crore
Private sector lender DCB Bank's profit after tax increased 24.5 percent year-on-year (YoY) to Rs 91.41 crore for the quarter that ended on September 2019, but asset quality weakened sequentially. The net growth was driven by other income, PPoP and NII. Net interest income, the difference between interest earned and interest expended, grew by 11.2 percent YoY to Rs 313.36 crore in Q2FY20, with advances as well as deposits showing a growth of more than 12 percent each.
Asset quality weakened further during the quarter that ended on September 2019 with gross non-performing assets (NPA) rising to 2.09 percent, up from 1.96 percent sequentially and net NPA also increasing to 0.96 percent from 0.81 percent QoQ.
Other income or non-interest income shot up 38 percent to Rs 101.39 crore and pre-provision operating profit jumped 26.3 percent to Rs 184.53 crore compared to same quarter last year.
Federal Bank Q2 profit spikes 57 percent to Rs 417 crore
Private sector lender Federal Bank has reported a healthy 56.7 percent year-on-year growth in Q2 FY20 profit, driven by other income and lower tax cost, but provisions remained elevated. Profit rose to Rs 416.7 crore against Rs 266 crore in same period last year.
Net interest income grew by 9.9 percent YoY to Rs 1,123.8 crore, with loan growth at 14.8 percent. Asset quality weakened during the quarter under review with gross non-performing assets (NPA), as a percentage of gross advances, rising 8 bps to 3.07 percent and net NPA increasing 10 bps to 1.59 percent quarter-on-quarter. Provisions increased sharply to Rs 251.8 crore versus Rs 192 crore in Q1 FY20 but fell from Rs 288.8 crore in Q2 FY19.Disclaimer: Reliance Industries Ltd, which also owns Jio, is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.