Three oil marketing companies (OMCs) and four refineries would help India Inc post 20 per cent plus growth in net sales for the sixth consecutive quarter in a row.
But, the net profit of the total sample of 342 companies, including seven oil companies, may decline around one per cent or two in the second quarter. Thanks to the government, OMCs are expected to report a 73 per cent decline in net profit.
Sectors that will drive profit growth include refineries, private banks, capital goods, cement, fast moving consumer goods, metals and oil & gas. Sectors with disappointing growth are public sector banks, construction, media, pharmaceuticals, steel, textiles, telecom and tyres.
The second quarter results will confirm the fear of slowdown in demand for manufacturing and services companies (ex-oil marketing and refineries), a single-digit growth in net profit and unabated pressure on operating margins.
The fact is that the preview, based on the estimates of 335 companies by eight brokerage houses, suggested net sales growth will be below 20 per cent at 15.84 per cent.
The rise in net profit would be around eight per cent, and the input cost pressure will hit operating margins by more than 200 basis points (bps).
Though the aggregate profitability is skewed due to the presence of OMCs in the sample, the net profit growth is likely to be subdued around eight per cent even if one excludes the three
OMCs from the sample.
This is because the sectors that pushed the net profit growth rate of the corporate sector in the past several quarters, are expected to show subdued profit growth this quarter.
In other word, auto ancillaries, automobiles, public sector banks, fertilisers, pharmaceuticals and sugar are expected to report a marginal rise or decline in the second quarter net profit.
The profit growth rate of Nifty companies would go up around seven per cent, and even if one excludes BPCL, Maruti Suzuki, Bharti Airtel and Tata Steel, which are expected to report decline in profit, the net profit rise of the remaining 46 Nifty companies will be modestly higher around 13 per cent.
The net profit of 16 firms are expected to decline, 12 could show a single-digit growth and another 16 are expected to show profit growth rate between 10 and 25 per cent.
Six could show a profit growth of over 25 per cent. The operating margins of the Nifty firms are expected to fall around 200 bps.
The second quarter earnings will be reported amid an adverse macro backdrop. Interest rates were up a further 50-75 bps during the quarter, demand in the domestic economy weakened and the rupee depreciated by over 10 per cent against the US dollar.
The number of companies with net profit growth rates of over 30 per cent will be around 17 per cent while that with decline will be high at 47 per cent.
The top three contributors to aggregate earnings are financials, oil & gas and metals, accounting for 57 per cent.
But, the net profit of the total sample of 342 companies, including seven oil companies, may decline around one per cent or two in the second quarter. Thanks to the government, OMCs are expected to report a 73 per cent decline in net profit.