September quarter results are unlikely to trigger fireworks in stocks despite a cut in the corporate tax rate. Slowdown fears are here to stay and investors should pick stocks carefully as revival is still some time away, suggest experts.
Brokerage firm Sharekhan expects a sobering quarterly performance, where headline aggregate earnings are likely to decline by 5.7 percent for Sensex companies.
“Expectations of a weak performance indicates the throes of slowdown that the economy finds itself in and also the effect impact of one-offs such write-downs of deferred tax assets, etc. Expectations of a healthy revival in corporate earnings appear to be further down the road,” said the report.
Sectors such as automobiles, telecom and metals are likely to clock losses or see their profits shrink while pharma, Agri, and FMCG are some sectors that are likely to do better.
“September quarter earnings are expected to be subdued for most of the sectors, as evident from the various industrial data published so far,” Amit Doshi, Investment Director at Care PMS told Moneycontrol.
“Automobile including its ancillaries, banking and finance, cement, metal, infra, and capital goods, consumer durables except for AC, real estate, textiles, etc. are expected to underperform,” he said.
Doshi further added that pharma, Agri inputs, FMCG including, Food & beverages, IT, paper & packaging, etc. are some of the sectors which are expected to do comparatively better.
We have collated a list of 10 stocks from various brokerage firms which are likely to report a loss in September quarter:
Brokerage Firm: Edelweiss Securities
Tata Motors: Likely to report a loss of Rs 1,221 crore
Edelweiss is of the view that global automaker, Tata Motors, is likely to report a loss of Rs 1,221 crore for the quarter ended September, weighed down by the fall in revenues.
The brokerage firm expects the consolidated revenue to fall 4.3 percent YoY due to weakness primarily in the India business. “We expect consolidated operating margin to improve sequentially by 220 bps to 7.1 percent,” said the report.
This is driven largely due to improvement in JLR, as its performance in China starts to improve, added the report.
V-Mart Retail: Likely to report a loss of Rs 29 crore
Edelweiss said that V-Mart retail is likely to report a loss of Rs 29 crore for the quarter ended September, weighed down by flat SSSG.
The brokerage firm expects V-Mart to report flat SSSG in spite of the base also being flat due to weaker consumer sentiment and the impact of floods in V-Mart's core business regions.
The company has added 12 stores in the quarter and 49 in the past one year, which is expected to aid overall sales growth. “We thus expect sales growth of 14 percent. In an environment of muted SSSG coupled with the accelerated store expansion, we estimate a very low EBITDA margin of 1 percent,” said the note.
Vodafone-Idea: Likely to report a loss of Rs 4,411 crore
Edelweiss is of the view that Vodafone-Idea is likely to report a loss of Rs 4,411 crore for the quarter ended September due to a decline in subscriber base.
The brokerage firm expects Vodafone Idea's revenue to drop 3.6 percent QoQ, due to 4.9 million decline in subscriber base during the quarter. “We are expecting an ARPU of Rs 107 for the quarter (ARPU in Q1FY20 - INR108), signalling a marginal decline of ~1 percent, largely due to seasonal weakness,” it said.
The network opex synergies and successful integration of operations are expected to arrest the EBITDA margin erosion at 80bps, to 31.6 percent, said the note.
Union Bank of India: Likely to report a loss of Rs 1,225 crore
Edelweiss said that Union Bank of India is likely to report a net loss of Rs 1,225 crore for the quarter ended September.
The growth is likely to be below trend, and any incremental slippages will likely be controlled, but the recovery trend will continue on soft terrain. “The commentary on the roadmap for a merger will be keenly watched,” said the report.
Yes Bank: Likely to report a net loss of Rs 1,907 crore
Edelweiss is of the view that YES Bank will likely report a net loss of Rs 1,907 crore for the quarter ended September weighed down by asset quality woes.
“We expect asset quality and credit cost to throw in negative surprises with higher than guided range. Also, deposits will witness QoQ dip of 8 percent along with loan growth decline of 4-5 percent,” said the note.
Fee income trends will be volatile and higher slippages will weigh on margins. This coupled with a one-time DTA mark-down will lead to a loss in this quarter.
Brokerage Firm: Motilal Oswal
SAIL: Likely to report a net loss of Rs 995 crore
Motilal Oswal expects SAIL to report a net loss of Rs 995 crore for the quarter ended September. SAIL’s EBITDA is expected to decline 61 percent on a QoQ basis to Rs 6.1 billion on lower steel prices and volumes.
The volumes would decrease by 2 percent on a QoQ basis to 3.2mt. Steel prices are expected to decline 3 percent QoQ on lower global prices.
Lemon Tree Hotel: Likely to report a net loss of Rs 1.7 crore
Motilal Oswal expects Lemon Tree Hotels to report a net loss of Rs 1.7 crore for the quarter ended September due to an increase in depreciation expense, but revenues are likely to grow on a year-on-year basis.
Consolidated revenue of Lemon Tree is expected to grow 26 percent YoY, mainly due to the commencement of its Pune hotel, and the Mumbai hotel, which did not commence operations during the base quarter.
The brokerage firm expects a loss in the September quarter compared to a profit of Rs 5.7 crore in Q2FY19, chiefly on account of an increase in depreciation, and interest cost.
Bharti Airtel: Likely to report a net loss of Rs 1,387 core
Motilal Oswal expects Bharti Airtel to report a net loss of Rs 1,387 crore for the quarter ended September, while revenues should grow marginally in the same period.
Consolidated revenue should grow 0.5 percent QoQ to Rs 2080 crore, while consolidated EBITDA is expected to decline 1.1 percent on QoQ to Rs 670 crore.
India wireless revenue is likely to drop 1.2 percent QoQ while India wireless EBITDA too is expected to decline 3.5 percent QoQ, said the report.
Bank of Baroda: Likely to report a net loss of Rs 1,200 core
Motilal Oswal expects Bank of Baroda to report a net loss of Rs 1200 crore for the quarter ended September as slippages likely to remain at an elevated level.
The brokerage firm expects the loan book to increase to Rs 6.6 lakh crore and deposit base to increase to Rs 9.3 lakh crore. But, expect slippages to stay elevated at 3.4 percent with GNPA/NNPA at 9.7%/3.8%.
PNB: Likely to report a net loss of Rs 4,271 crore
Motilal Oswal expects PNB to report a net loss of Rs 4,271 crore for the September quarter due to the highest DTA or deferred tax assets impact.
The brokerage firm expects the loan growth to remain muted at 1.5 percent YoY and deposits growth to remain subdued at 6 percent YoY.
The net interest income or NII is expected to grow at 6 percent YoY while margins are estimated to remain flat at 2.35 percent.
Motilal Oswal expects PNB to report a loss of Rs 42.7 billion as it has the highest DTA impact of Rs 50.4 billion. PAT (ex of DTA) is estimated at Rs 7.7 billion.
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