Monday, April 4, 2011

Result Season to Guide Market Ahead

The new financial year has begun and corporate financial teams are busy preparing their final numbers, which are going to give guidance to the investment market for the full year. Last week of March and beginning of April shows that investor confidence is positive. Hopefully Banks, Capital Goods and IT companies would keep their investors happy with the overall performance.

Though small compared to TCS and Infosys, HCL Tech may post growth much higher than its big brothers in the industry. With estimated PBDIT of above Rs 700 Cr Y-o-Y growth would be about 30% which is  higher than even TCS and much ahead of Infosys. Hot Infosys is expected to have a Net profit of Rs 1,900 Cr. TCS with a sales of Rs 10,500 Cr will continue to hold its position as the largest IT company. In the year ahead, this segment is expecting revival of outsourcing and higher growth than 2010. Depreciating rupee helps this sector most.

Turn around in the story of Siemens will provide relief to the Capital goods market. L&T and BHEL both had good order book position which will get reflected in the results with a growth of more than 20% in net profit, but future trend is not so easy with Chinese competition and increased input costs. Both L&T and BHEL would post sales of Rs 16,000 Crore plus. The delays in project decision due to Mega Economical reasons in the country will affect the prospects of this segment. Confusing environmental guidelines fuel to the indecisiveness of the companies and loser is the capital goods segment. BHEL is expected to miss the order flow target of Rs 60,000 crore for the year ended March 2011.

The auto sector reported another quarter of brisk demand, but the concerns regarding rising cost will continue to haunt the sector in the March 11 quarter. Most likely to get hit is the nation’s favourite Maruti Suzuki. It is likely to have a net profit down by about 25% on y-o-y basis. This quarter profit for the company is likely to be below Rs 500 cr. In contrast, Tata Motors on a consolidated basis is expected to report an improved performance in the quarter, helped by strong demand conditions for its marque JLR brand in emerging markets

The banking sector is expected to show a robust year-on-year net profit growth of 18% due to improvement in credit demand and stable asset quality of the banks. The credit deposit ratio of banks which rose from 70.82% in February 2010 to 74.95% in Feb 2011 is also expected to come down this quarter due to expected acceleration in deposit growth. All major banks like SBI, Axis Bank, HDFC, BOB are likely to post much higher net profits, but for ICICI PBDIT is predicted to be negative. Increasing interest rates are putting pressure on treasury gains.

Increasing competition and rise in advertisement expenses put the FMCG companies in low growth area. Small companies like Godrej Consumer, Dabur and Marico are struggling to maintain market share and margins. ITC and HUL are relatively more comfortable in the domestic market.

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