Earnings season holds out sliver of hope

Nov 26 2012, 09:44 IST
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SummaryIndia Inc Q2 results brought in some much-needed cheer for investors despite challenges.


Capital Goods

The capital goods sector, considered a proxy for business investment plans, has been consistently battered in the governments official IIP estimates released every month. Flat revenues y-o-y, due to weaker execution and lower off-take by industrial customers was seen, with order flows continuing to be under pressure. Private sector equipment majors L&T and Thermax, however, reported better than estimated numbers, even as ABB and Havells largely disappointed. L&Ts net profit was 11 per cent higher than estimates, driven by improved margins and higher other income. In power generation, the overall climate continues to remain constrained and BHEL maintained that the intake in FY13 is expected to be limited.


The sector posted a mixed performance, with topline growing on a year-on-year basis due to capacity addition and higher tariff but declining sequentially due to lower plant load factor and availability, according to a research report by IndiaNivesh. PSUs witnessed strong PAT growth, led by 21 per cent YoY net profit growth for NTPC (on higher capacity addition). However, independent power producer(IPPs) like Adani Power and JSW Energy disappointed due to higher dependency on imported coal. Tata Power reported a net loss due to impairment charges for Mundra project.

Consumer Goods

In the consumer goods sector, bellwether stock Hindustan Unilever surprised positively on margin expansion, ITC met cigarette volume expectations but surprised on margins from the tobacco business, Britannia disappointed on Biscuits volume growth that was up just 2 per cent. Moderation in volume growth was visible across companies in the sector, with Britannia, HUL, Dabur and Marico showing a perceptible moderation in volumes, even as ITC posted a sequential increase in volumes.


In the Healthcare space, Dr Reddys Labs reported higher EBITDA margins driven by strong topline growth, while Suns better than expected operational performance was led by strong profitability at overseas arm Taro and favourable currency equation, according to the Motilal Oswal report. Cipla reported higher than expected EBITDA, driven by better sales mix in its export business and favourable currency. Ranbaxy witnessed higher than expected core profitability led by higher Lipitor sales and partly due to favourable currency.

In the technology space, TCS surprised positively with volume growth of 5 per cent quarter-on-quarter while Infosys margin decline of 170bps QoQ despite no impact from wage hikes. In Telecom, all three listed operators Bharti, Idea and Reliance Communications beat estimates by 2.5-3 per cent at EBITDA

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