Active Stocks
Thu Mar 28 2024 15:59:33
  1. Tata Steel share price
  2. 155.90 2.00%
  1. ICICI Bank share price
  2. 1,095.75 1.08%
  1. HDFC Bank share price
  2. 1,448.20 0.52%
  1. ITC share price
  2. 428.55 0.13%
  1. Power Grid Corporation Of India share price
  2. 277.05 2.21%
Business News/ Companies / Sales, profit growth subdued as earnings revival proves elusive
BackBack

Sales, profit growth subdued as earnings revival proves elusive

A Mint analysis of 300 of the BSE 500 companies shows net sales rose at a mere 5.99%, the slowest pace in more than a year

Photo: MintPremium
Photo: Mint

Mumbai: Revenues for Indian companies for the three months ended 30 September rose at the slowest pace in five quarters, showing that an earnings revival is still to take shape amid hopes that corporate reportcards may get better.

A Mint analysis of 300 of the BSE 500 companies for which comparable data was available for the past 25 quarters showed net sales for these companies rose at a mere 5.99%, the slowest pace in more than a year.

Net profit rose at 16.89%, the slowest in the past four quarters. It had declined by 3.64% in the September 2013 quarter.

Banks, financial companies, oil and information technology (IT) firms have been excluded from the analysis as they follow a different earnings model. Piramal Enterprises Ltd, too, was excluded as the company had a big one-time gain in the June quarter after it sold an 11% stake in Vodafone India Ltd for 8,900 crore.

Net profit for companies on the benchmark Sensex rose by a mere 3.47%. A Mint earnings preview report based on brokerage estimates ahead of the earnings season had said that fiscal second-quarter profit growth for the 30 members of the Sensex would rise as much as 10%.

“It has been a mixed sort of earnings season with polarization still continuing. The market cheered good numbers and was quite severe on companies which failed to deliver," said Devang Mehta, senior vice-president and head of equity advisory at Anand Rathi Financial Services Ltd. Shares of top software services company Tata Consultancy Services Ltd (TCS) slid 8.7% on 17 October after its results failed to meet Street expectations.

Of the 30 Sensex companies, 11 missed the estimates compiled by Bloomberg, while 19 have beaten or met such forecasts.

“Except for a few sporadic, stock-specific positive surprises, this earnings season has not led to any earnings upgrade," said Amisha Vora, joint managing director at Prabhudas Lilladher Pvt. Ltd.

“It will take two or three more quarters for a meaningful revival to take place," said Vora, adding that a visible pick-up in ground-level activity was missing. “Next year this time, we should see better times."

The infrastructure sector could see some pick-up in terms of order inflow in the March quarter, but a pick-up in credit growth and a revival in the consumption cycle will take longer, Vora said.

“The good thing is inflation has become benign. We will need a good monsoon next year. That, along with a pick-up in infra space, will lead to a multiplier effect for job creation," she said.

To be sure, analysts remain upbeat on the earnings prospects for 2015-16 and this optimism surrounding a recovery in earnings and the economy has been driving the market higher. The 30-share Sensex has rallied 32% so far this year. India has been the best-performing major market in the world in 2014. Analysts expect the bull run to continue.

“We believe the economic growth recovery underway will likely sustain current valuations, especially as it starts manifesting in both macro (economic growth, inflation) and micro (corporate earnings) data points," UBS Securities India Pvt. Ltd, the Indian securities arm of UBS AG, said in a note on 11 November.

“Unlike the last three years, we expect FY16 and FY17 earnings growth estimates of 15%+ to be met," UBS analysts Gautam Chhaochharia and Sanjena Dadawala said in the note.

September quarter results for auto companies were a mixed bag. Tata Motors Ltd’s consolidated fiscal second-quarter net profit fell 7.1%, lagging analyst estimates, as weak domestic sales weighed on the company’s earnings despite continued strength in its UK-based Jaguar Land Rover unit. Maruti Suzuki India Ltd put up a decent show for the September quarter as it posted a forecast-beating 28.7% jump in net profit.

Hero MotoCorp Ltd, the country’s largest two-wheeler maker, posted a 58.6% jump in fiscal second-quarter profit to 763 crore, beating analysts’ estimates. Rival Bajaj Auto Ltd’s September quarter profit fell 29%—the most in 17 quarters—after the two-wheeler maker took a one-time expense related to its Pantnagar factory in Uttarakhand.

Cement companies posted robust earnings, spurred by a seasonal surge in demand. UltraTech Cement Ltd, India’s biggest cement maker, beat analyst estimates by reporting a 55% rise in fiscal second-quarter profit, driven by an increase in domestic cement volumes. Second largest cement maker ACC Ltd reported a 62% jump in net profit and attributed the increase to better management of distribution costs, optimized sourcing of inputs and improved realizations.

Rival Ambuja Cements Ltd reported a 44% rise in net profit for the quarter on higher sales realization, but fell short of analysts’ expectations.

Sun Pharmaceuticals Industries Ltd, India’s largest drug maker by revenue, reported a 15.4% increase in its consolidated net profit on increased sales in the domestic as well as export markets. Next in rank Dr Reddy’s Laboratories Ltd posted a 16.8% drop in net profit, even as sales grew 7%.

Hindustan Unilever Ltd, the country’s largest packaged consumer goods company by sales, reported an 8.1% increase in net profit, falling slightly below analyst expectations, signalling that an uptick in consumer sentiment is yet to translate into higher spending.

ITC Ltd, India’s biggest cigarette maker, which also has interests in packaged consumer goods and hotels, posted a net profit increase of 15.6% in the fiscal second quarter as it boosted cigarette sales by 14.5% and its non-cigarette consumer goods business saw revenue rise 11.9%.​

Telecom companies had a strong quarter as demand for mobile data services increased.

Bharti Airtel Ltd’s profit more than doubled in the fiscal second quarter as the country’s largest communications services provider benefited from a surge in mobile data consumption and lower finance costs. Idea Cellular Ltd beat analysts’ profit estimates for the September quarter as it posted a 69% rise in earnings, led by revenue growth from mobile data and value-added services.

Among the IT stocks, Infosys Ltd was the only software services company among the top three to beat analyst estimates. It reported a higher-than-expected 28.6% increase in quarterly net profit, while bigger rival TCS reported a sequential drop in its fiscal second-quarter rupee net profit growth for the first time in 12 quarters. Wipro Ltd, the third largest software services exporter, posted a lower-than-expected 8% increase in profit after the company effected wage increases in the preceding June quarter. Adverse currency fluctuations also hit earnings for Wipro.

Top lender State Bank of India (SBI) posted a 30.54% rise in September quarter net profit, which fell short of analysts’ expectations, and warned that there would be no quick rebound for bank. While strong growth in other income helped boost profits, the bank cautioned it expects only a gradual improvement in its lending business and asset quality, adding that a real recovery could be at least a year away.

ICICI Bank Ltd, India’s largest private sector bank, said stand-alone net profit rose 15% in the September quarter as it earned higher interest income, particularly on loans made to individuals.

Reliance Industries Ltd reported a 4.5% increase in second-quarter profit, driven by improved gross refining margins and lower input costs. Cairn India Ltd reported a 33% drop in net profit in the quarter ended 30 September because of lower crude oil prices and a shutdown for maintenance at its Rajasthan block.

Ashwin Ramarathinam contributed to this story.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Corporate news and Updates on Live Mint. Download The Mint News App to get Daily Market Updates & Live Business News.
More Less
Published: 16 Nov 2014, 11:51 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App