India Inc Q4: Some 60% of firms lag profit estimates

The fourth-quarter results season is turning out to be another damp squib with most companies that have announced results so far falling short of the analyst estimates. Out of the 21 companies on the Nifty index that have announced results so far, about 60%, or 14, have fallen short of profit estimates while only eight, or about 40% firms, managed to meet or exceed them, according to Bloomberg estimates. Axis Bank, Adani Ports and Special Economic Zone, Bharti Infratel, ICICI Bank, Maruti Suzuki, Wipro, Indiabulls Housing Finance, UPL, Infosys and UltraTech Cement are among 14 companies that did not meet the profit estimates. On the other hand, companies including YES Bank, Vedanta, Reliance Industries, Hero MotorCorp, Tata Consultancy Services, Kotak Mahindra Bank and HDFC have beaten the estimates.

According to Bloomberg mean estimates of analysts, the 30 Sensex companies may show a 9.7% profit gain while sales may rise 10.5% in the fourth quarter. “The fact is that most of the companies are still going through single digit syndrome. The information technology (IT) is one such sector which is facing this syndrome. The Reliance Jio storm has impacted the telecom industry results while the NPA issue continues to worry the banks,” G Chokkalingam, founder and managing director of Equinomics Research and Advisory said.

According to a report by Motilal Oswal Securities Ltd (MOSL), overall profit after tax (PAT) growth has been below its estimates till now, largely dragged by Axis Bank.

The report said the Q4 earnings season has been broadly in line with expectations in terms of revenue. “We expect the performance of corporate-focused private banks and PSU Banks to drag the aggregates in fourth-quarter,” it said. Approximately, 72% of 67 MOSL coverage companies have reported Ebitda either in line or above the estimates.

“There is a disappointment in this quarter, but the guidance is good. Margin pressure, rising commodity and crude prices are definitely affecting the companies, but the future looks good,” A K Prabhakar, head of Research, IDBI Capital said.

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“The effect will continue for next one or two quarters. The oil price hike has added to the difficulties of companies in the airline sector because of which IndiGo saw a bad quarter. Apart from the large-sized companies, mid-sized firms will also see the effect in their quarterly results,” Chokkalingam said.

Source: DNA Money