India Inc will be delivering its June quarter results at a time when there is slowdown blues all around. It will be a repeat of the March quarter where financials took the lead, while muted performance could be expected from autos, metals, agri, oil and gas, and housing finance companies (HFCs).
“There has been no respite on the slowdown narrative, with several high-frequency indicators and corporate commentaries pointing toward a weak backdrop as we enter into the first earnings season of FY20,” Motilal Oswal said in a note.
MOFSL Universe PAT is likely to grow by 7 percent on a YoY basis, led by financials and dragged by metals. Global cyclicals are likely to post a decline of 16 percent in profits, while defensives are expected to post flat profits YoY.
Even though the June quarter earnings are likely to be a repeat of March quarter or in other words uninspiring for markets – the focus now shifts to FY20 and FY21 estimates which could throw some green shoots of a double-digit earnings growth.
“Lot of hope is pinned on the earnings performance of FY20E and FY21E. We expect further downgrades in consensus earnings. However, over the longer term, the government’s fiscal discipline is likely to attract foreign capital to at least partially fund the huge infrastructure projects, which would also mean better times for industrials and building material companies,” Sharekhan said in a note.
“Post the recent correction, Sensex is already trading at 16x-16.5x consensus earnings of FY21. Stable macros and accommodative monetary policy will be favourable for long-term equity investors,” it said.
Here is a list of ten stocks which are likely to more than double their bottom line for the quarter ended June:
Brokerage Firm: Motilal Oswal
ABB: Net profit to rise by 102 percent YoY
Motilal Oswal expects the revenue growth if 11 percent on a YoY basis to Rs 1850 crore over strong growth in the discrete automation and motions. The EBITDA margins should also improve to 67 percent on a YoY basis. The net profit is likely to grow by 102 percent to Rs 89.10 crore.
JK Cement: Net profit to rise by 148 percent YoY
The Q1 FY20 volumes (grey cement + white) are estimated at 2.27 million tonnes, a fall of 2 percent on a YoY basis. But, realizations are estimated to increase by 8 percent on a QoQ basis to Rs 5,592 per tonne.
Motilal Oswal estimates EBITDA per ton at Rs 1136 (+Rs 165 QoQ), primarily due to better realizations. EBITDA margin is expected to expand 1.6 percent QoQ to 20.3 percent.
Biocon: Net Profit to rise by 183 percent YoY
Biocon (BIOS) is expected to report robust revenue growth of 43.6 percent on a YoY basis to Rs 1,600 crore, primarily led by approximate 85 percent YoY growth in biologics (28 percent of sales).
The research services business is expected to grow at 30 percent YoY to Rs 520 crore, while small molecules is expected to grow at 20 percent YoY to Rs 480 crore for the quarter.
Aditya Birla Fashion: Net profit to rise by 1609 percent YoY
Motilal Oswal estimates the net profit to rise by over 1,000 percent on a YoY basis for the quarter that ended on June to Rs 95.8 crore. Revenues are expected to grow by 10 percent on a YoY basis to Rs 2,119 crore, while EBITDA is likely to rise by 19 percent YoY to Rs 135 crore.
Retail companies under the coverage of Motilal Oswal are expected to report average 11 percent SSSG in Q1 FY20 on the back of (a) lackluster retail spending during election season, and (b) End of season sale (EOSS) beginning earlier than usual.
Pre-election uncertainties in April led to retailers witnessing lack of consumer spending and lower footfalls. But, post-election, retailers have seen a pick-up in sales and consumer footfalls in May, which has led to better performance compared to the previous quarter.
Equitas Holdings: Net Profit to rise by 106 percent YoY
Motilal Oswal expects the net interest income (NII) growth of 35 percent on a YoY basis due to (a) A pick-up in loan growth and (b) Recalibration on the liability side (sufficient availability of funds).
The asset under management (AUM) is expected to grow around 35 percent YoY, as the securitized portfolio continues to run down. On the other hand, net interest margin (NIM) is expected to contract by around 15 bps QoQ to 8.7 percent on account of an increase in the cost of funds and moderation in yields.
Brokerage Firm: Kotak Institutional Equities
Axis Bank: PAT likely to rise by 141 percent YoY
Kotak Institutional Equities expects the loan growth at 13 percent on a YoY basis with a greater focus on retail, and NIM at 3.5 percent (unchanged QoQ but there is a positive bias as pricing environment has been favorable for banks).
The brokerage firm expects slippages worth Rs 2,500 crore (2 percent of loans) mostly from 'below investment grade book'. It also expects more traction on recovery as well from the write-off pool. No major concerns on asset quality.
Dalmia Bharat: Net Profit likely to rise by 309 percent YoY
Kotak Institutional Equities expects volumes to remain flat to negative on a YoY basis at around 4.5 million tonne (around 19 percent QoQ). It estimates realizations to increase by 9 percent on a QoQ basis to Rs 5,480/tonne (up 4 percent YoY) led by a sharp increase in prices in South and East markets.
The volume growth was absent on account of low demand due to unavailability of labor and general elections during the quarter. The brokerage firm estimates the EBITDA/ton to increase 17 percent QoQ to Rs 1,300 per tonne (up 11 percent YoY) led by higher realizations, which offset higher other costs on account of low volumes.
India Cements: Net Profit likely to rise by 253 percent YoY
Kotak Institutional Equities expects a decline of 1 percent on a YoY basis in volumes to 3 million tonne (down 8 percent QoQ). It estimates blended realizations to increase by 6 percent on a QoQ basis to Rs 4,980 per tonne (up 12 percent YoY) due to stability in pricing during Q1 FY20, after a sharp rise in Q4 FY19 in South markets.
The brokerage expects EBITDA per tonne to increase by 36 percent on a QoQ to Rs 800 per tonne (up 58 percent YoY) led by (1) higher realizations, and (2) lower fuel costs aided by a decline in pet-coke prices that offset higher other costs due to lower volumes.
Apollo Hospitals: Net Profit to rise by 170 percent YoY
Kotak Institutional Equities expects the revenue growth of 18 percent on a YoY basis, driven by 16 percent growth in healthcare business and 20 percent YoY growth in the pharmacy business.
Within the healthcare, the brokerage firm expects existing centers to grow at 12 percent YoY with new centers' contribution driving incremental growth. It expects 20 percent growth in standalone pharmacy business driven by the aggressive expansion of the store network.
The EBITDA margin is likely to remain steady on a QoQ basis at 11.2 percent as improvement in performance at new hospitals and AHLL will be offset by losses in Proton and seasonal weakness in Q1.
HCG: Net Profit likely to rise by 104 percent YoY
Kotak Institutional Equities expects the revenue to increase by 16 percent on a YoY basis, led by 10 percent YoY growth in mature centers along with ramp-up of newly set up facilities.
It expects EBITDA margin to increase 40 bps QoQ to 12.9 percent as losses from new centers decline modestly and expect a gradual improvement in Milann performance after a weak FY19.
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