The Nifty EPS (earnings per share) for FY19 is expected to grow at 16 percent and remains well above 7.4 percent and 8.3 percent growth witnessed in FY17 and FY18, respectively.
Revenue is expected to grow robustly at more than 20 percent but due to margin headwinds and extended provisioning requirements of corporate lenders, bottom-line improvement is slow.
For Q2FY19, we expect Nifty companies to report EPS growth of 10 percent. IT, Consumers and global cyclical expected to report healthy numbers while PSU banks, auto and infra to report muted results this quarter.
Automobiles: Revenue growth of 14 percent YoY is expected. EBITDA (earnings before interest, taxes, depreciation, and amortisation) margin is expected to drop on account of rising raw material prices and rupee depreciation. Capacity constraints in 4-wheeler space and competitive intensity in 2-wheeler are added negative.
Infrastructure and capital goods: Slow execution, tightening liquidity and high-interest rates causing stress on working capital of companies. Infrastructure companies may report 25-30 percent sales growth, though the profits may grow by a mere 11 percent.
For capital goods, net profit is expected to decrease by 4 percent, though sales growth of 15 percent is expected for the quarter.
Cement: Volume growths could be at 7 percent for pan-India players and 13-15 percent for companies based in southern India. Petcoke and diesel prices have raised by 5 percent QoQ and imported coal by 9 percent QoQ. These costs will keep net profits growth muted at negative single digit for the industry.
Consumer: Efforts on increasing distribution network will come into play yet again. Volume growth will be backed by sustained rural demand, urban demand recovery and new product launches. Sales growth is expected at 12 percent, EBITDA at 15 percent and profits at 16 percent for the quarter
Healthcare: US sales are expected to stabilise on account of new product launches. Overall sales growth is expected to be at 8 percent while the net profit is expected to decline by 5 percent.
Metals: Buoyant prices will keep sales high, though the volatility in earnings may persist. Sales may grow at 20 percent while net profit is expected grow at 44 percent for the quarter. We expect ferrous companies to report better performance on account of better pricing.
Oil & Gas: Inventory gains and marketing margins are expected to stay healthy. City gas distributors to report a healthy 21 percent sales growth. Reliance may report 52 percent YoY sales growth. ONGC and OIL are expected to witness 45-60 percent growth in EBITDA due to higher realizations.
Technology: The depreciation in rupee will be positive for tech firms. Companies are expected to report an average 22 percent sales and net profit growth for the quarter.
Financials: We may see a healthy advance growth of 25 percent and pre-provisioning profit growth of 12-14 percent in these companies. Though, provisions remain the key component to monitor.
Axis Bank, SBI, Coal India, ONGC, Reliance and Sun Pharma are key contributors to Nifty earnings growth for FY19 and FY20 and thus are the key results to track.Disclaimer: The author is Head of Research at Narnolia Financial Advisors. The views and investment tips expressed by investment experts on Moneycontrol are their own, and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.