Early birds show profits soaring

Corporate earnings are firmly on the fast track. The financial results of 115 manufacturing companies for the quarter ended June 2005 have shown a hefty 58.16 per cent increase in their net profits.

The net profit of these early birds had gone up by 43.6 per cent in the quarter ended March 2005, 40 per cent in the quarter ended December 2004 and 13.6 per cent in the quarter ended September 2004. In the first quarter of 2005-06, these companies' tax provisions were up by 49.3 per cent.

"All indications are that the momentum of growth is likely to continue till the economy gets over-heated. The stock market is betting on the growth story and it is highly unlikely that the trend will get reversed soon," said an analyst with a foreign brokerage.

The growth in net profit came on the back of a 28.4 per cent rise in sales and a hefty 104 per cent rise in other income.

The operating profit margin increased by 237 basis points to 30.27 per cent; the gross profit margin increased 308 basis points to 24.53 per cent and the net profit margin increased 297 basis points to 15.78 per cent.

The overall interest cost of these 151 companies climbed 14.4 per cent, indicating that the honeymoon with low interest regime is getting

over. The quarterly results also signal the emergence of small and medium enterprises.

Hotel Leela, KSL Industries, GMM Pfaudler, Clutch Auto, Ind Swift Laboratories and many other SMEs outperformed by posting over 100 per cent growth in net profit.

The best performer among 115 early birds has been Aban Lloyds (net profit up 138 per cent), Varun Shipping (net profit up 268 per cent), Indo Rama Textiles (net profit up 388 per cent), Ind Swift Laboratories (net profit up 251 per cent), Bajaj Hindustan (net profit up 285 per cent) and India Bulls (net profit up 431 per cent).

The indications are that the growth in net profits would continue to be high in sectors like cement, auto ancillaries, capital goods, engineering, hotels, oil drilling, shipping, sugar, textiles and chemicals.

However, there has been slowdown in earnings growth rate of the information technology sector. The results of TCS and Infosys Technologies bear testimony to that.

The sales and profit growth in two-wheeler giant Bajaj Auto indicates that two-wheeler companies are able to control output cost very well.

Early results indicate a slowdown in earnings of steel companies with Tata Metaliks and Tata Sponge Iron registering decline in net profit.