How Did Your Favourite Companies Do In Q2

The Nifty50 index comprising stocks of 50 companies representing various sectors and is owned and managed by India Index Services and Products (IISL), which is a wholly owned subsidiary of the NSE Strategic Investment Corporation Ltd.

Of the total 50 companies of Nifty, 31 companies had reported their second quarter earnings, comprising 60 per cent of the index constituents. Therefore, we have identified sectors in which almost all the companies have declared their current quarter results. The quarterly results until November 8 have been a mixed bag with slight deviation here and there. Moreover, the trend has largely been on a positive side. In all, we have identified 21 companies representing six sectors and have put them together and have come up with a consolidated presentation of quarterly result especially for our reader-investors.

Cement Sector

There are three cement stocks in the index namely ACC, Ambuja Cements, UltraTech Cement. On a consolidated basis, the sector has performed well as compared to the previous year’s quarter ended September 2015. Total net income stood at Rs 13563.66 crores posting an increase of 17 per cent YoY. EBITDA increased by Rs 2072.55 crores which is an increase of 24 per cent as compared to the previous quarter. PAT of the three companies put together stood at Rs 912.38 crore, an increase of 20 per cent as compared with the corresponding quarter of the previous fiscal. Among the three, UltraTech Cement is the major contributor in the profit chart and contributes around 67 per cent in the total consolidated profits put together. In the trio, ACC has disappointed in the current quarter ended September 2016. PAT of the company has decreased 29 per cent as compared to its previous year. Ambuja Cements, on the other hand, continues to post healthy numbers. PAT of the company has increased 40 per cent as compared to corresponding quarter of the previous fiscal. The Union Budget 2016-17 has proposed a slew of measures to boost infrastructure and investment, which will be positive for the cement sector going forward. On the other hand, increased spending on infrastructure will also increase the demand for cement.

Auto Sector

From the auto segment, there are four stocks in the Nifty 50, Hero MotoCorp, Bajaj Auto, Maruti Suzuki and Eicher Motors. The June-September quarter was remarkably fabulous for the industry and these companies have come out with flying colours, which was largely due to the Pay Commission boost given by the Centre. The auto segment remained favourite as compared to all other consumer segments. On a consolidated basis, the total revenues of the four auto companies stand at Rs 37,158.9 crore, an increase of 14 per cent YoY. EBITDA stood Rs 6242.91 crore, which is an increase of 21 per cent as compared with previous quarter ended September 2015. The combined PAT of these four companies in this quarter stood at Rs 4911.2 crore, an increase of 36 per cent YoY. Unlike other sectors, no auto stock in the Nifty index registered a negative result in the current quarter. Maruti Suzuki notched up largest share in profits of the sector and contributed almost 48 per cent of the total consolidated profits of the four Nifty auto stocks put together. It was followed by Bajaj Auto and Hero MotoCorp, which contributed 22 and 20 per cent, respectively.

There are altogether five IT companies in the Nifty 50 index. Unlike March-June quarter which was disappointing for IT companies, the September quarter has fared well. Wipro, Tech Mahindra, Infosys, HCL Technologies, TCS are the IT scrips in Nifty 50. The total consolidated revenues of these companies saw an uptick in this quarter and stood at Rs 72364 crore, showing a growth of 9 per cent YoY. EBITDA in the July-September stood at Rs 18663.7 crore and has grown 6 per cent. PAT has grown 5 per cent and stood at Rs 14613.5 crore. Tech Mahindra and Wipro are the only companies registering de-growth of 18 and 8 per cent, respectively. Tata Consultancy Services and Infosys are the two major companies which contribute a larger chunk of profits among these five companies. These two companies together constitute 70 per cent of the total profits. The IT sector is of paramount importance, as its contribution in India’s GDP has increased by 9.5 per cent up to FY15. Therefore, strong IT earnings will impact the Indian GDP positively.

Banking

For quarterly earnings review we have taken two FMCG heavyweights, namely, Hindustan Unilever (HUL) and ITC. Both HUL and ITC, the top two FMCG companies in the Nifty 50, delivered a sales growth of 5.42 per cent in Q2 at Rs 22,096.87 crore as compared to Rs 20,959.89 crore achieved in the same quarter of the previous fiscal. But volume sales of the country’s largest FMCG player, HUL hardly increased in the quarter gone by, thus making it one of the worst quarters in more than a decade, led by a weak rural and urban demand. However, sales growth of ITC was strong in second quarter. On the operational level, the two consumer companies EBITDA saw a growth of 6.68 per cent in the second quarter ending September 30 at Rs 5034.65 crore as against Rs 4719.36 crore in the corresponding period of last fiscal. Profitability for the second quarter saw a good growth of 10.82 per cent to Rs 3595.63 crore vis-à-vis Rs 3244.67 crore. These companies, however, are optimistic that the consumer demand would witness a revival on the back of good festival demand, monsoons and the money from the Seventh Pay Commission and OROP award.

Telecom 

Bharti Airtel and Idea Cellular, the two telecom stocks in the Nifty 50, posted an increase of 4.44 per cent in sales revenue at Rs 33,971.74 crore in Q2 as compared to Rs 32,527.27 crore in the same period of the last fiscal. Sales growth of the companies have slowed down in the last few quarter, negatively affected by competitive pressures and stagnation of telecom markets where new additions have been slow and low. EBITDA in Q2 increased by a strong 11.41 per cent at Rs 12,300.32 crore on the back of operational efficiency on the part of both the telecom companies. For the quarter gone by, these companies also saw realisations coming down due to higher cost pricing pressures courtesy competition. Telecom players are witnessing a jump in their respective revenue break as data revenues continued to grow at a healthy pace. Profits were under pressure with a steep decline of 32 per cent on a yearly basis to Rs 1552.16 crore as against Rs 2284.98 crore in Q2FY16. Profits have been primarily hit by rising finance cost year-on-year as the telecom companies’ highly leveraged balance sheets weighs negatively on their profits. In terms of earnings, Q3 would be keenly watched as effect of new entrant Reliance Jio would be correctly factored in the telecom company’s numbers, especially with respect to data revenues.

CONCLUSION

Of all the reported quarterly results, we have seen secular trend emerging when it comes to sales growth in consumption-related companies, be it material goods or services. There have been sectors like Information Technology which are facing headwinds and have been bogged down by various factor beyond the control of the company’s management. However, there were also sectors facing positive tail winds when it came to demand revival and stable earnings. The automobile sector was one pocket that performed strongly on the back of strong volume-led sales numbers. The banking sector which constitutes a major chunk of the index, saw stable earnings for the quarter in review on the back of asset quality review (AQR) initiatives being undertaken by the RBI.

The first batch of second quarter earnings have been in line with the street expectations. However, the second quarter results would be keenly watched, with special focus on the PSUs, select automobiles and pharma majors in the coming weeks.