Q3 results meet muted expectations as margin pressure appears to ease
Rakesh Arora, MD & head of research, Macquarie capital securities, pegs an increase of 100 bps in the operating or Ebitda margins, adding about 8% to the earnings growth. “The market has a potential for upgrades as declining non-food inflation and interest rate cuts would add to earnings growth,” he added.
During the third quarter of the fiscal, after factoring in the the impact of stock purchases and finished good purchases, the total raw material cost of the universe, grew at about 8%, its lowest in at least six quarters.
Interest costs, however, continued to eat into the net profits as the same advanced by 29% against last year as compared to a 5% y-o-y growth in the quarter ending September 2012. In particular, intrest burden carried by companies like Reliance Infra, Tata Power, Jindal Steel & Power, Ultratech and Bharti Airtel expanded at higher rates compared to last year.
The latest results season begun on a positive note, with heavyweights like Infosys, Reliance Industries, ITC, L&T and Maruti Suzuki providing bright spots with their quarterly numbers. However, as it progressed, the momentum declined with results, including those of Hindustan Unilever, Bharti Airtel, Hero Motocorp and Reliance Infra, turning out to be major letdowns.
The last leg of quarterly results were a major disappointment as third quarter numbers of JSPL, Hindalco, Tata Steel, Tata Motors and DLF were below market expectations.
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