All eyes will be on the UN climate change conference that kicks off this weekend. In the corporate world, quarterly earnings of major auto and pharma firms are on the agenda this week.
Every Monday, Mint’s Plain Facts section features key data releases and events to watch out for in the coming week. This weekend marks the start of the much-awaited climate change conference in Glasgow. In India, corporate earnings are expected from key companies in the auto, pharmaceutical, cement and banking sectors. Here are the five key events and numbers to track:
1. COP26 meet
The 26th United Nations Climate Change Conference (COP26) starts on Sunday in Glasgow, Scotland. It is the most significant climate change meeting since the 21st edition, COP21, that had led to the Paris agreement in 2015.
Delayed by the pandemic, COP26 gets critical significance coming in the backdrop of a UN report that noted that the Paris deal’s target—to limit global warming to 1.5 degrees Celsius above pre-industrial levels—may not be achieved even if the world reaches net-zero emissions by 2050. In the most likely scenario, the warming could be more than 3 degrees.
At COP26, countries will be expected to update their nationally determined contributions (NDCs) since the Paris agreement. India is likely to achieve at least two of its three NDCs before 2030, and may announce updated goals. The summit also aims to finalize the Paris Rulebook that will direct financial help from developed countries to developing ones, including India.
2. Auto earnings
Demand for the beleaguered auto segment was hurt in the September quarter by the unending supply constraints. The global shortages of semiconductors, further accentuated by lockdowns in some chip-manufacturing markets, hit the passenger vehicles sales volumes. Rising input costs on account of higher commodity prices also played a spoilsport.
Two-wheelers remained on a slow lane as well due to the pandemic impact in rural markets, but the commercial vehicle segment managed a relatively smoother ride due to a pick-up in economic activities.
Automakers Maruti Suzuki and Bajaj Auto, which are set to announce their September-quarter results on Wednesday, are expected to feel the pinch of the raw material crunch. Analysts at Axis Securities estimate the two companies’ operating margins to contract by around 400 and 240 basis points (bps) year-on-year, respectively.
Some respite could come as the situation begins to normalize now, and this could help scale up the availability of raw material in the ongoing quarter.
3. Pharma earnings
Two leading pharmaceutical firms are set to declare their financial results for the quarter ended September this week: Cipla on Tuesday and Dr Reddy’s Lab on Friday.
Price erosion in the key US market has been playing a spoilsport for the sector in the past few months. These pressures are likely to squeeze margins in the September quarter as well.
However, sales momentum from the India business could more than make up for the lacklustre US business, analysts said. This optimism has helped healthcare stocks keep up their gains even as the second covid-19 wave has subsided.
The earnings are now likely to be driven by a strong comeback in portfolios that had been overshadowed by the demand for covid-related products and treatments. A quick turnaround in the acute therapy segment has aided growth recently. ICICI Securities projected an 8% y-o-y growth for Cipla and 14% for Dr Reddy’s in their India business.
Two major banks—Axis Bank and Canara Bank—will release their financial statements for the September quarter on Tuesday.
Credit growth in general has been sluggish as the banking sector is still recovering from the covid-related impact. Loans offtake is projected to be muted in the upcoming results as well. But investors will watch out for the banks’ commentary on the silver lining that the festival demand offers.
Analysts expect net interest income and net profit to get a boost for Axis Bank, but for Canara Bank, the pre-provision profit could fall significantly short of the June-ended quarter. Base effect could, however, keep year-on-year growth robust.
Slippages could moderate sequentially but are likely to stay elevated, particularly in the small and medium enterprises and the retail segment. Given the persistent worry of a third wave, banks will most likely maintain their provision buffers.
5. Cement earnings
Three cement companies are set to announce their September-quarter results in the first three days of the week: The Ramco Cements, Ambuja Cements, and Dalmia Bharat Cement.
The sector is likely to have suffered from seasonal demand weakness due to the monsoon rains during the quarter under review. However, analysts still expect the year-on-year performance to be somewhat healthy due to the low base of 2020.
A major factor playing on the financials for cement companies is prices of input material. Despite recovering from the second covid-19 wave and pent-up demand driving an output spike, cement manufacturers were not able to raise product prices so far due to the seasonally lower realizations. The prolonged monsoon also forced the companies to roll back previous price increases in order to safeguard profit margins.
Several analysts forecast a drop in operating margins in the September quarter. However, companies are now raising prices, which could aid profitability moving ahead.
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