Third-quarter results expectations

Automobiles

The automobile sector had a good second quarter with sales improving for many companies. Even companies such as Tata Engineering and Mahindra & Mahindra did well along with companies in the two-wheeler segment.

The third quarter is also expected to be good. Analysts expect Tata Engineering and M&M to continue to see overall growth in sales volumes and profits. With a 23 per cent rise in sales for third quarter, TVS Motors is expected to outshine others in terms of performance.

Hero Honda is not expected to do as well as its sales growth has slowed down. For the month of December 2002, its sales grew by a mere 1.05 per cent compared to 21 per cent for TVS and 10.6 per cent for Bajaj Auto.

Banking

The banking sector could see sustained rise in profits. The cut in the interest rates announced by the central bank should enable the banks to sustain treasury profits.

Analysts say that the cut in deposit rates effected by several banks should help improve net interest margins.

Additionally, it is expected that the non-performing assets should increase by a lower amount this year. It is likely that the big banks could be the biggest gainers.

Analysts predict a 20 per cent rise in earnings per share for HDFC Bank and the State Bank of India. ICICI Bank is expected to show slower 14 per cent growth in earnings per share.

Cement

Analysts do not expect an extraordinary performance from cement companies this quarter. "Compared to the second quarter of this fiscal, cement prices have improved and hence realisations should be better," says Sanjay Chhabbria, IDBI Caps.

But on a year-on-year basis, realisation could still be lower by about 7-8 per cent, say analysts. Gujarat Ambuja Cements may be the worst affected and analysts expect a drop in bottomline YoY.

Net profit could be lower by 20 per cent. The other three companies, ACC, Larsen & Toubro and Grasim, however, may see positive growth in net profits.

ACC's profits are expected to be up backed by rationalisation in interest costs, and better operating efficiencies.

L&T's profits are expected to be driven by better growth in its engineering business. Its net profit is projected at Rs 80 crore for this quarter.

"Operating margins for L&T will be up this year primarily because of high value orders it has executed compared to an year ago," says Nachiket Moghe, senior equity analyst, Prabhudas.

Again, Grasim's profits will be up because of better realisation in its VSF and sponge iron business. Analyst peg net profits in the range of Rs 95-103 crore (Rs 950 million-Rs 1.05 billion).

FMCG

Barring ITC, Nestle and Godrej Consumer, analysts expect most other FMCG companies to record a 3-8 per cent de-growth in sales for the quarter ended December, 2002.

However, the profits are likely to sustain due to improved efficiencies. ITC is likely to benefit from the price hikes it had effected. Nestle has been doing well in all the segments it has a presence in.

According to the ORG-Marg retail audit figures for November, Nestle posted a 16.60 per cent growth in sales as its chocolates and culinary business turned in a good performance.

Godrej Consumer is also expected to do well as its soaps business is doing quite well. Insufficient monsoons are likely to have little impact on the sector this quarter.

The fall in growth will be mainly because of competitive pressures, saturation in penetration levels and a decline in agricultural growth rates.

Information technology

Frontline tech stocks namely Infosys, Satyam and Wipro are expected to continue their impressive performance this quarter also.

Infosys is likely to report a double-digit sequential growth which essentially means that the company would comfortably surpass its earnings growth guidance of Rs 145 per share for this fiscal.

But bottomline growth of frontline companies is expected to be lower than the growth in revenues due to pressure on margins.

Given the slowdown in software arena, infotech companies are witnessing a rise in selling & marketing expenses in order to garner business.

Moreover, the appreciation of rupee by 40 paise against the dollar during the last quarter will impact other income.

In mid-caps, Mastek and Blue Star Infotech are expected to show robust growth in revenues as well as in earnings for the last quarter.

The sharp upsurge in product sales is expected to boost i-flex solutions performance, while NIIT's results could improve on the back of an uptrend in new enrollments in its training and education business.

However, analysts are not too optimistic about the quarterly results of Digital GlobalSoft, HCL Technologies and Mascot Systems.

Steel

This quarter too, analysts expect a good show by Tata Steel. They are projecting a net profit at Rs 280 crore for the quarter. Consequently, operating margins are likely to jump to 25.5 per cent compared with 16.5 per cent during the same period last year. Domestic steel prices are up about 40 per cent across the board for products on a YoY basis.

Analysts also expect eight per cent volume growth for the company. They also expect a favourable sales mix with increased contribution from high value added products.

Telecommunications

Analysts expect the competition-led fierce price war among telecom services providers to keep the revenue as well as earnings growth rates of incumbents VSNL and MTNL in negative territory for the last quarter also.

The worst hit could be VSNL which is expected to end the year with as much as 40 per cent drop in its earnings.

MTNL's performance may be marginally better with bottomline shrinking by around 16-20 per cent for FY03. For the December quarter net subscriber additions for MTNL's fixedline services is at best expected to remain flat.

Bharti Tele-Ventures has reported robust growth in its subscriber base during the last three months, especially in its new circles.

With close to 30 lakh (3 million) cellular subscribers now, the company has garnered a 28 per cent market share of the cellular market.

Optic fibre cable manufacturers like Askhoptic and Sterlite Optical are estimated to continue to show a declining trend in revenues and earnings on the back of sharp fall in prices and lack of demand from incumbent operators.

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