The Q4 results season is approaching its last leg with most companies on Dalal Street having announced their earning for the quarter ended March 2016. Benign commodity prices and some traction in volumes are helping India Inc post better numbers this earnings season.
Profits, for a clutch of 686 companies (excluding banks and financials, Cairn and Vedanta), in the three months to March, have risen 27 per cent year-on-year, thanks to a near 400 basis points drop in the share of raw materials to sales and virtually no increase in interest costs.
So far, around 20 companies in the BSE Sensex have declared their financial results for Jan-March period. According to corporate database Ace Equity, net profit of these companies jumped 6 per cent year-on-year for the quarter ended March 31, 2016, whereas net sales jumped 9 per cent during the same period.
Most heavyweights have surprised the street but the good news is that both large and small companies seem to be doing well, especially in the consumer good space.
We collate a list of 10 stocks from various research reports on which market experts are looking bullish after their Q4 earning numbers.
TeamLease Services: HR firm TeamLease Services reported net profit of Rs 9.14 crore, up 34.4 per cent year-on-year, for the March quarter of 2015-16. The company had posted net profit of Rs 6.80 crore for the January-March period of 2014-15.
According to Prabhudas Lilladher (PL), TeamLease maintained its strong growth with around 25 per cent revenue growth in FY16. The brokerage house believes that the investments lay a solid foundation for healthy revenue growth and margin expansion going forward. PL has ‘Buy’ rating on TeamLease with target price of Rs 1,170.
Allcargo Logistics: Allcargo Logistics reported a 22 per cent rise in standalone net profit at Rs 32.43 crore for the quarter ended March 31. The firm had posted a net profit of Rs 26.56 crore in the year-ago period.
Prabhudas Lilladher in a research report said, “Allcargo’s Q4FY16 operational performance was in line with our estimates, however the net profit beat estimates. The real revival in PES segment is yet to pick up which we foresee to strengthen going in FY17. At present, the stock is trading at good entry point, considering 20 per cent net profit growth in FY17E, improving return ratios and strong management bandwidth. We maintains ‘Buy’ on Allcargo shares with target price of Rs 202.”
Hexaware Technologies: The company’s consolidated net profit jumped 1 per cent year-on-year to Rs 84.19 crore for the quarter ended March 31, 2016. It had posted a net profit of Rs 83.35 crore in the corresponding quarter a year ago.
According to Prabhudas Lilladher, Hexaware Technologies is adding nearly 5,500 seat capacity in 2016 which will lead to increase in capex to $40mn. However, going forward from next calendar year the capex will be much lower. Hence management is confident of maintaining high cash distribution to shareholders. The brokerage house has ‘Accumulate’ rating on Hexaware Technologies with target price of Rs 255.
Skipper Ltd: For the quarter ended March 2016, Skipper reported net profit of Rs 36.12 crore, up 19.36 per cent, against Rs 30.26 crore in the corresponding quarter a year ago. Net sales of the company jumped 4.66 per cent year-on-year to Rs 522.73 crore. Order backlog as of March 2016 end was flat at Rs 2,429 crore against Rs 2,448 cr in March 2015.
On the PVC side, Skipper expects to commence its 5,000 MTPA plant near Hyderabad in Q1FY17. The company is in the process of ramping up production in its other units and the management expects volume to grow by about 70 per cent in FY17. Motilal Oswal in research said, “PVC pipes continues to witness strong growth and we continue to believe this business will drive growth over the next few years. We have ‘Buy’ rating on Skipper with target price of Rs 205.”
TTK Prestige: TTK Prestige reported 121.52 per cent rise in net profit at Rs 21.62 crore for the quarter ended March 31, 2016. It had posted a net profit of Rs 9.76 crore in the corresponding quarter a year ago. Net sales of the company jumped 7.5 per cent year-on-year to Rs 307.72 crore in the quarter under review. The company reported net sales of Rs 286.21 crore in the same quarter last year.
According to Motilal Oswal, TTK Prestige financial results beat market estimates. The brokerage house in a research note said, “New launches and acquisitions, narrowing ecommerce price parity, softening raw material prices and higher utilisations reinforces our belief and we upgrade net profit estimates by 7 per cent and 5 per cent in FY17 and FY18. We expect revenue CAGR of 22 per cent and PAT CAGR of 34 per cent over FY16-18E. We maintains ‘Buy’ on TTK Prestige with target price of Rs 5,400.”
Finolex Industries: Net profit of Finolex Industries jumped 183.51 per cent year-on-year for the quarter ended March 31, 2016 against Rs 27.68 crore in the corresponding quarter a year ago.
According to Religare Institutional Research, Finolex Industries reported better-than-expected Q4FY16 revenues of Rs 800 (+2.9 per cent YoY) driven by an 18.8 per cent YoY growth in PVC pipe & fitting volumes, even as PVC resin/PVC pipe realisations trended lower.
The brokerage house is bullish on Finolex Industries. It said, “We raise our FY17 and FY18 PAT estimates by nearly 8 per cent, deriving comfort from Finolex Industries’ significantly better debt position. We continue to like the company for its strong franchise and improving balance sheet. The share price of the company can hit Rs 370 by March 2017. However, an abrupt movement in raw material prices is a key risk to our call.”
Torrent Pharma: Torrent Pharma reported consolidated net profit of Rs 357 crore for the quarter ended March 31, mainly on account of robust sales in the US market. It had posted net profit of Rs 130 crore for the January-March period of the previous fiscal.
According to JM Financial, Torrent Pharma reported better than anticipated financial results for the quarter ended March 2016. Torrent remained the only company so far to have reported a healthy growth in its base business which implies that it has maintained its market share in legacy products. The brokerage house sees FY17 as a year of consolidation as US business mean reverts but expect continued strength in its domestic franchise. JM Financial sees growth returning FY18 onwards as approvals start flowing from Dahej and launch intensity picks up and expects the share price of the company can touch Rs 1,660 in the next few quarters.
DB Corp: The company reported 0.38 per cent rise in consolidated net profit figures at Rs 64.24 crore for the quarter ended March 2016 against Rs 64 crore in the corresponding quarter a year ago. According to Edelweiss, DB Corp’s Q4FY16 sales and net profit came in line with estimates. DB Corp remains one of the best plays in print space. The company is ramping up in the digital domain too. The concluded Phase III auction will help it widen its presence in the radio industry. Interest cut will aid further ad growth. Chinese handsets will also start contributing to ad growth in FY17. The brokerage house further said, “DB Corp is among our top picks in the media space. We estimate 19.1 per cent earnings CAGR over FY16‐18. We believe the share price of the company can touch Rs 390 going forward.”
Pidilite Industries: Adhesives and industrial chemicals manufacturer Pidilite Industries reported a 48.97 per cent increase in standalone net profit at Rs 115.04 crore for the March quarter. It had posted a net profit of Rs 77.22 crore in the same period last year. According to Edelweiss, Pidilite’s Q4FY16 revenue, EBITDA and PAT growth was ahead of market estimates. The 7‐quarter high sales growth was impressive, albeit on a low base (3.1% YoY volume growth in Q4FY15).
The brokerage house said, “Gross margin at 55.3 per cent (highest in at least 8 years), led by softer VAM during tough macro economic conditions is reflective of strong pricing power. Entry of Asian Paints into adhesives (Loctite) and increased aggression in waterproofing (Smartcare) need to be closely monitored. We remain positive in view of gradual demand recovery, new businesses and pick up in international growth. We maintains ‘Buy’ on Pidilite with target price of Rs 731.”
Dalmia Bharat: Diversified firm Dalmia Bharat reported more than twofold jump in consolidated net profit at Rs 114.86 crore for the quarter ended March 31, on account of higher sales. It had clocked a net profit of Rs 47.28 crore in the same quarter corresponding year.
According to Edelweiss, With the new plant at Belgaum commissioned and imminent pick up in the southern demand led by AP and Telangana, the brokerage house believes the stock would be one of the prime beneficiaries of the same given that it is one of the most cost-efficient cement players. Therefore, Edelweiss continued to maintain ‘Buy’ on the stock with target price of Rs 1,300.”