Constituent companies of the Bombay Stock Exchange (BSE) index Sensex are expected to post 23-26 per cent rise in aggregate net profit for the quarter ended December 2010 (Q3), compared to the same quarter of the previous fiscal, says market experts.
Oil and gas, metals and auto companies are expected to lead, while telecom, power and cement companies could see some fall in their profitability.
In one of the most optimistic predictions, Lalit Thakkar, managing director-institutions, Angel Broking, said, "We expect the Sensex companies to report a robust 19 per cent year-on-year (YoY or compared to the same quarter of the previous fiscal) performance on the sales front. On the bottomline (profit after tax (PAT) or net profit) front, the performance is expected to be even better, with a YoY growth of 26 per cent."
Motilal Oswal Securities has predicted figures of 17 per cent and 23 per cent for growth in revenue and PAT respectively, despite the market breaking out from the low base seen in corporate results for the four quarters ended September, 2009.
"At a glance, the aggregate PAT growth of 23 per cent YoY seems in line with the first two quarters of the current fiscal (at 25 per cent and 27 per cent, respectively). But what is materially different is that growth in the first two quarters was on the low bases of the first two quarters of 2009-10, when PAT actually de-grew. We believe this is confirmation of a new earnings growth cycle for the markets," Rajat Rajgarhia, head of research, Motilal Oswal Securities, added.
Leading broking firm Prabhudas Lilladher, which has studied the Nifty companies instead, found that revenue of the Nifty companies (excluding oil and gas companies) is expected to grow by 22 per cent YoY and PAT by 14.2 per cent.
"Earnings before interest, taxes, depreciation and amortisation (EBITDA) margins will fall by 63 basis points (or bps, 100 bps equals one per cent) YoY, mainly due to higher commodity prices. Higher interest costs are also expected to depress PAT somewhat," said Apurva Shah, head-researchinstitutional equities, Prabhudas Lilladher.
Motilal Oswal has identified telecom and cement sectors as the only sectors that could see de-growth in PAT during the quarter. It sees commodities, autos and private banks driving the growth in PAT of the Sensex.
It also predicts that the growth will be broad-based.
Angel Broking has almost concurred with Motilal on the best performers, while replacing cement with the power sector among the laggards.
The oil and gas sector is expected to be the major growth contributor to Sensex sales and profit, with 20 per cent and 47 per cent growth in sales and profit respectively, mainly on the back of the 80 bps expansion in margins and 79 per cent increase in profit of ONGC. " Excluding oil and gas sector, growth in Sensex sales and earnings is expected to be 13.8 per cent and 17.2 per cent, respectively," Thakkar said.
"Telecom is the biggest drag on Sensex PAT growth with Reliance Communications' PAT expected to be down 67 per cent and Bharti's PAT down 23 per cent. Cipla, Hero Honda and Maruti are the other companies with PAT degrowth YoY," Rajgarhia said.
However, Prabhudas Lilladher has identified a different set of sectors as leaders and laggards.
"Partly due to seasonal factors and partly due to better execution, we expect significantly improved quarterly performance from capital goods and construction companies. Driven by higher prices, cement companies are also expected to report better quarter-on-quarter (QoQ or compared to the previous quarter) earnings growth," Shah of Prabhudas Lilladher said.
Courtesy: Mail Today 
Special 
