In addition to sustained weakness in net profit, the upcoming result season is expected to highlight further downgrades to 2013-14 earnings expectations. Analyst estimates show that Sensex companies may post anemic sales growth for the fifth consecutive quarter in three months ended March 2013 quarter even as operating and net margins may show some improvement on sequential basis. Experts also believe the current FY14 earnings expectations may get corrected given the disappointing report card for the second half of 2012-13.
In what is expected to turn out into yet another tepid quarter for India Inc?s financial performance, the year on year (yoy) earnings growth of the Sensex companies is pegged in the range of a positive 1% to a contraction of over 3%. As per CLSA, that sees the earnings growth of its coverage universe to contract by 3.5% before exceptional items, the decline would be guided by deceleration in revenue growth.
It is estimated that the benchmark earnings growth for the quarter ending March 2013 may be spoiled by numbers of Tata Motors, Hindalco and Bharti even as pharma, financials and IT companies may report healthy profits.
Various estimates indicate the revenue growth of the Sensex companies to drop as low as 5.6%, its lowest in nearly three and a half years. The slow-down is expected to be caused by auto, cement and consumer companies due to weak sentiment and lower discretionary spending. Edelweiss securities however anticipates the moderation to be spread across the board with a yoy decline in sales of construction, fertilizer and even real estate sectors.
According to Ambit Capital, besides waning consumption in specific pockets, limited signs of improvement in capex is leading to poor expectations not only for the last quarter of fiscal 2013 but also for fiscal 2014. It has downgraded its FY14 earnings estimates for automobiles, industrials and metals to sub-consensus estimates.
In a recent note, BofAML said that FY14 is unlikely to see recovery in earnings owing to delay in economic recovery and looming downgrades in energy and financial companies that may account for half of the Sensex profit growth in the fiscal. In addition to Tata Motors, Tata Steel and Bharti that drove Sensex EPS downgrades in FY13, even BHEL contributed to earnings revision of FY14. The brokerage has pinned the earnings growth for the Sensex to be under R1300, indicating a growth of close to 8%.
Experts also believe that a part of this dismal report card may already been discounted by the market in the recent correction in which the benchmarks retreated more than 8% from its January high.
Losing Earnings
* Sensex cos may post anemic sales growth for the fifth consecutive quarter even as operating and net margins may show some improvement
* CLSA pegs earnings growth of its coverage universe to contract 3.5% guided by deceleration in revenue growth
* Sensex cos’ revenue growth pegged to drop as low as 5.6%. The slowdown is expected to be caused by auto, cement and consumer cos
* Earnings growth may be spoiled by the numbers of Tata Motors, Hindalco and Bharti even as pharma, financials and IT companies may report healthy profits
