Index companies are expected to report a combined net profit of Rs 1.03 trillion during Q4 FY19, the highest in four years, while their combined net sales are expected to reach Rs 10 trillion, marginally lower than the Rs 10.1 trillion during Q3 FY19.
and non-bank finance
companies, the outlook on Nifty 50 companies is not as heartening, because combined net profit is estimated to decline by 2.5 per cent YoY during the fourth quarter against 12.8 per cent growth a year ago and 2.6 per cent decline during the third quarter of FY19. Combined net sales excluding financials are expected to grow by 8.5 per cent YoY during the fourth quarter — the worst in the last 10 quarters.
“We expect net income of the Kotak Institutional Equity (KIE) coverage universe to increase by 56 per cent YoY in 4Q FY19, led by the banking sector, which will likely report strong earnings growth due to a low base. Excluding the banking sector, we expect moderate 6 per cent YoY net income growth,” wrote Kotak Institutional Equity analysts led by Sanjeev Prasad in their earnings estimate report for the fourth quarter.
“Global cyclicals, the driver of earnings growth over the last few quarters have decelerated sharply. Corporate banks
will account for entire growth in the Nifty and the broader Motilal Oswal universe’s earnings performance,” wrote Gautam Duggad of Motilal Financial Services.
Excluding all cyclicals (financials, oil and gas, and metals and mining companies), index companies’ net profit is expected to grow by 2.6 per cent YoY during Q4 FY19 down from 3.7 per cent YoY growth a year ago and 7.2 per cent growth during the previous quarter. In comparison the combined net sales of non-cyclical companies is expected to grow by 3.2 per cent during the fourth quarter - the worst in the last seven quarters.
The analysis is based on January-March 2019 (Q4FY19) earnings estimates by equity brokerages including Kotak Securities, Edelweiss Securities, Motilal Oswal Financial Services, Reliance Securities, Prabhudas Lilladher, and Narnolia Financial Advisors. For banks and non-banking financial firms, net sales are gross revenues net of interest expenses, while for others its total income from sale of goods and services (net of indirect taxes). Profits for the current quarter are estimates by brokerages and may exclude exceptional gains and losses.
Among individual index companies, State Bank of India, Axis Bank and Coal India are expected to bring in most of the gains in incremental earnings during the quarter. At the other end of the spectrum Indian Oil Corporation, Tata Motors and Vedanta are expected to be laggards with large negative swing in earnings during the quarter.
Most brokerage have factored in a slowdown in demand.
“Contrary to expectations of acceleration in demand growth, demand has seen slowdown in core sectors like automobiles. In consumer staples, rural demand is now growing in line with urban demand, as against earlier trend of 1.3-1.5x growth a couple of quarters back,” Amnish Aggarwal of Prabhudas Lilladher said in his report.
Analysts say that while corporate profits will be in focus this earnings season, the market will give more weightage to elections results as far as valuations are concerned.