Forecast is bullish: Fourth-quarter results expected to be robust

MUMBAI: If the weak-kneed markets are looking for support, here's one: Consensus estimates for India Inc's fourth quarter (Q4) results - due in April and May - show that analysts are bullish on most sectors and sector leaders.

A Religare Securities analyst bets, the Q4 results should be better than Q3 for most sectors and companies.

Look at the auto sector first. Good volumes, both domestic and export, are expected to make toplines robust. For instance, the passenger car segment has grown by 24%, medium-heavy commercial vehicles have grown by 35% and light commercial vehicles by 36%. Though the two-wheeler segment seems to be subdued with just 13% growth, motorcycles are growing faster at the rate of 15%. Says Dipesh Sohani, auto analyst with Investsmart Securities: "The indications are that toplines of leaders like Tata Motors, Maruti and Ashok Leyland will be better during Q4."

However, analysts expect operating margins to come under pressure, thanks to sharp rises in input prices, high depreciation and bulging staff costs. Says Sohani: "The two-wheeler segment may see more pressure, which will see a margin impact."

As far as the media sector is concerned, Q4 is expected to be decent for broadcasters. Says Priyank Sinhgal, media analyst for Edelweiss Securities: "With the cricket World Cup on, advertising revenues of industry leaders like Zee Entertainment should perk up." The poor performance of the Indian cricket team may dent that somewhat, but few analysts expect Q4 profits to be dented too much. Adds Ashish Gupta, media analyst with KR Choksey Shares and Securities: "For the media industry, this Q4 is going to be the best part of the season."

Analysts are equally bullish on the FMCG sector. The consensus is that FMCG companies should do well in Q4 since a few festivals fall during this period. Analysts expect FMCG companies to report mid-teen to high-teen growth.

The consensus is equally bullish on the power sector, which is expected to churn out improved figures for Q4. However, Q4 may not be as good as Q3 for the power sector. Consider: bottomlines of power industry leaders jumped up during Q3 because of tax refunds and that will surely not happen in Q4. Says Emkay Share's power analyst Mehul Mukati: "However, Reliance Energy should report higher profits for Q4 because of other income."

The big divide is about banking sector's performance. Though private sector banks are expected to show improved operating margins, public sector banks might come under pressure. That is because of standard asset provisioning. Says an SSKI Securities spokesperson: "With bond yields moving up, there could be some surprises on the negative side as far as public sector banks are concerned."

However, most analysts expect the Q4 growth of pharma companies to be stable at 15%. But, year-on-year growth for major pharma players is expected to be around 25%. Says Manoj Garg, pharma analyst, Emkay Share and Stock Brokers: "Quarter to quarter, major pharma companies will show an average growth of 8-10%." That is because March is a low quarter for pharma companies.

Moving over to infotech sector, analysts expect a sequential growth of 7% for most large IT companies, both in topline and bottomline. Says Krupal Maniar, IT analyst for Emkay Share and Stock Brokers: "The Q4 performance of IT companies will be in line with market expectations." Moreover, IT companies should report quarter to quarter improvement in margins.

Even cement is expected to fare better in Q4, despite the budget hiccups. The consensus here is that Q4 figures should be better than Q3. Says Manish Balwani of Emkay Share & Stock Brokers: "Since demand is higher in Q4, this quarter will naturally be better than the previous quarter." Another reason is that prices have been fairly stable across the country. So, you can expect a volume growth of 8%. Though it sounds good, it is lower than the 17% growth seen during the last quarter.

Even the oil and gas sector should perform better, though upstream companies like ONGC are expected to be slightly subdued because of higher subsidies. Since there was a price cut in November and February, net realisation is expected to be lower.

As far as telecom is concerned, most telecom analysts are bullish, particularly on players like Bharti and Reliance, as their Q4 figures are expected to be better. Says an industry analyst: "Quarter to quarter, I expect all the telecom companies to come out with heartwarming performances."

In capital goods, analysts are gung-ho. With most projects coming on stream as scheduled, the sector is expected to do better. Says Mukul Jain, capital goods sector analyst for Prabhudas Lilladher: "The payback period will be longer for future projects, but growth should continue."

Q4 is generally the best quarter for the capital goods sector. Reason: much of the revenue accrues during this quarter. Moreover, with the costs of inputs beginning to moderate — excise and customs duty have been slashed on steel and copper —there is no reason why Q4 should disappoint.

Finally, hotel industry analysts expect a better Q4. Demand is growing at 8% per annum and new supply is not coming up fast enough. Hotel capacities are not expected to move up at least for another 18 months. Says Pratik Dalal, hotels analyst for Emkay Share and Stock Brokers: "You should particularly expect hotels with diversified properties to do well."