Nifty Q3 earnings robust overall, auto disappoints; check top stock bets

Updated: February 21, 2019 11:09:32 AM

Among Nifty companies; 40% of the companies have been in line while moreover, the same percentage of the companies of the Index has seen Q3FY19 earnings within expectations.

Companies that missed the earnings was interest rate sensitive, specifically, the Auto sector

By- Mustafa Nadeem

The earnings in Q3FY19 has been much better compared to Q2FY19 since we have seen improvement in numbers that have been reported as compared to its previous quarters with many companies beating the estimates while also those companies that have missed the street expectations in last quarter has seen some spin around. Since we are focusing on Nifty 50 companies; 40% of the companies have been in line while moreover, the same percentage of the companies of the Index has seen Q3FY19 earnings within expectations.

Companies that missed the earnings was interest rate sensitive, specifically, the Auto sector. Not to mention the huge loss posted by Tata Motors has dragged the weight of overall earnings of Nifty to the downside. The earnings season has been good as most companies that missed the estimates in last quarter/s have seen improved top-line, bottom-line, and margin expansion as well. Titan is one of the stocks that have caught the eye since it missed its estimates in Q2 due to contraction in its margin but the company has posted robust growth in its Q3 numbers.

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The company was able to catch growth of 35% in its top line.  Tech Mahindra is another stock from the IT space that has been performing well. The earnings were in line in Q2 while it has beaten the estimates this quarter with an expansion in its margin by 50 BPs while it has improved 300 BPS Y/Y. Energy Space – Coal India has seen a growth of 15% in its Top line and improved Operating margins. We expect this space to continue to perform well in coming quarters.

Given the current volatility in equity markets due to macroeconomic event ahead, we expect the consumer cyclical can continue to see volume growth with improved margins and stocks like Titan company from the space is a decent bet to place. The IT space is also looking attractive as companies like HCL Tech, Tech Mahindra has posted better numbers. Energy space companies – Coal India, ONGC and HPCL has seen improved margins. Coal India is one the stocks that can perform well in coming quarters from energy space.

(This article has been authored by Mustafa Nadeem, CEO, Epic Research. Views expressed are author’s own. Kindly consult your investment advisor before making any investment decision)

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