September earnings are likely to be a replay of the June quarter--tepid and uneventful, as some analysts put it.
A demand slowdown in the domestic economy and weak global commodity prices are expected to take a toll on the earnings, with few bright spots.
“It is important to look at this quarter’s numbers from a PBT perspective, as the reduction in the corporate tax rates will result in several adjustments in this quarter’s tax numbers (eg large corporate banks will make deferred tax adjustments),” Motilal Oswal said in a report.
The brokerage firm is of the view that the tax cuts will largely limit the downgrades rather than drive big upgrades in earnings. Private banks, consumer, cement and capital goods could provide some respite.
Edelweiss Securities expects retail banks, OMCs and consumer discretionary to post 25 percent-plus growth. However, auto, corporate banks, telecom, and metals are likely to either post profit contraction or even losses. There is likely to be a sharp slowdown in IT and industrial earnings growth to sub-5%.
We have collated a list of ten stocks from various brokerage firms that are likely to more than double their net profit year on year:
Brokerage Firm: Reliance Securities
India Cement: PAT likely to grow by 586% YoY
Reliance Securities is of the view that India Cement is likely to report nearly 600 percent rise in net profit YoY to Rs 9.8 crore for the quarter ended September, despite fall in volumes and marginal impact on net revenues due to slowdown in infra projects in the South.
Somany Ceramics: PAT likely to grow by 185% YoY
Somany Ceramics is likely to report nearly 200 percent rise in net profit YoY to Rs 13.1 crore in the September quarter, despite dismal growth in volumes due to moderate demand environment. Soft fuel prices and favourable product mix will result in strong operational performance.
JK Lakshmi Cement: PAT likely to grow by 230% YoY
JK Lakshmi Cement is likely to report over a 200 percent rise in net profit on a YoY basis to Rs 25.8 crore for the September quarter despite a muted demand environment.
The company’s Q1FY20 realisation and cost benefits would lead to strong YoY operating profit. Low clinker sales and steady North realisation are likely to aid YoY pricing.
Brokerage Firm: Motilal Oswal
Sanghi Industries: PAT likely to grow by 670% YoY
Motilal Oswal expects Sanghi Industries to report an over 600 percent growth in net profit on YoY basis for the September quarter despite fall in volumes. The stock trades at a P/E of 10.9x (FY20E) and 14.2x (FY21E), EV/EBITDA of 8.7x (FY20E) and 6.7x (FY21E), and EV/t of USD47 (FY20E) and USD37.3 (FY21E).
Brokerage Firm: Edelweiss Securities Ltd
Federal Bank: PAT likely to rise by nearly 100% YoY
Federal Bank will likely see its net profit rise by 96 percent YoY to Rs 520 crore during the September quarter. The business momentum is likely to be steady.
But, asset quality volatility is something that investors should watch out for, given the system-wide rise in stressed assets.
Titagarh Wagons: PAT likely to rise by 122% YoY
Titagarh Wagons’ net profit will likely rise 122 percent on a YoY basis to Rs 11.6 crore. Increased order intake from the Indian Railways, increased momentum in private sector ordering and ramp-up in execution are the key monitorables for Titagarh Wagons.
Amber Enterprises: PAT likely to rise by 327% YoY
The standalone net profit of Amber Enterprises is expected to rise by 327 percent on a YoY basis to Rs 4 crore for the quarter ended September.
On standalone levels, Amber is expected to post a 19 percent growth in revenue in a seasonally weak quarter, driven by a 25 percent growth in revenues from AC (on a low base - 23% drop in Q2FY19).
The near doubling of EBITDA margin is on a low base quarter (Q2FY19 was impacted by negative operating leverage due to slow growth).
ABB Ltd: PAT likely to rise by 185% YoY
ABB Ltd’s net profit is likely to rise by 185 percent to Rs 103 crore in the September quarter.
ABB expects 15 percent growth in continued businesses, mainly driven by industrial automation. Order inflow remains a key monitorable.
Gujarat Gas: PAT likely to rise by 259% YoY
The net profit of Gujarat Gas is expected to rise by 259 percent on a YoY basis to Rs 196 crore for the September quarter.
Volumes at Gujarat Gas will decline slightly (-2.0% QoQ) due to lower volumes from Morbi. Edelweiss Securities expects Gujarat Gas to have cut prices sharply to support volumes, resulting in EBITDA margins declining to INR 4.5/scm (-19.4% QoQ).
Fortis Healthcare Ltd: PAT likely to rise by 156% YoY
Fortis Healthcare Ltd could see its net profit rise by 156 percent on a YoY basis to Rs 42 crore for the quarter ended September.
Edelweiss estimates the top line to grow by 11 percent on a YoY basis – hospital business is estimated to grow at 10 percent and SRL at 10 percent.
This is accompanied by EBITDA growth (pre-Ind AS 116) of 15 percent YoY on account of cost efficiencies through improved lab efficiencies and vendor negotiations.
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