4QFY21 is likely to be another strong quarter as high-frequency data points indicate decent economic recovery. However, towards the end of the quarter, a spike in COVID-19 cases in the second wave has started to somewhat muddy the outlook, Motilal Oswal says.
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//$ .each(d.ac,function(i,v) //{ // accStr+=”+v.nm+”; //}); $ .each(d.data,function(i,v) { if(v.flg == ‘0’) { var modalContent = ‘Scheme added to your portfolio.’; var modalStatus = ‘success’; //if error, use ‘error’ $ (‘.mc-modal-content’).text(modalContent); $ (‘.mc-modal-wrap’).css(‘display’,’flex’); $ (‘.mc-modal’).addClass(modalStatus); //$ (‘#acc_sel_port’).html(accStr); //$ (‘#mcpcp_addportfolio .form_field, .form_btn’).removeClass(‘disabled’); //$ (‘#mcpcp_addportfolio .form_field input, .form_field select, .form_btn input’).attr(‘disabled’, false); // //if(call_pg == “2”) //{ // adtxt =’ Scheme added to your portfolio We recommend you add transactional details to evaluate your investment better. x‘; //} //else //{ // adtxt =’ Stock added to your portfolio We recommend you add transactional details to evaluate your investment better. x‘; //} //$ (‘#mcpcp_addprof_info’).css(‘background-color’,’#eeffc8′); //$ (‘#mcpcp_addprof_info’).html(adtxt); //$ (‘#mcpcp_addprof_info’).show(); 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After a stable December quarter, the strong earnings momentum is likely to continue in the March quarter as well, led by a pick-up in economic activity and a healthy demand recovery.
Earnings are likely to be strong but investors should watch out for the management commentary for FY22 as the second wave of COVID-19 picks up traction.
“4QFY21 is likely to be another strong quarter as high-frequency data points indicate decent economic recovery. However, towards the end of 4QFY21, a spike in COVID-19 cases in the second wave has started to somewhat muddy the outlook,” Motilal Oswal said in a report.
“The interplay of a resurgence in COVID-19 cases and the pace of vaccination would decide the trajectory of economic recovery, going ahead, in our view,” said the note.
A low base and strong earnings momentum are likely to propel earnings growth to a record 100 per cent plus YoY, according to some brokerage firms.
In terms of sectors, earnings are likely to be very strong (>40 per cent ) in cyclicals such as banks and metals. However, rising input prices are likely to weigh on the margins of cement, FMCG and domestic auto companies.
“Nifty companies are likely to post 21 per cent YoY EPS growth in FY21. Profit growth is likely to be very strong in cyclicals — commodities, banks, industrials, and consumer discretionary, ex-auto. However, some softening of earnings momentum is likely in the FMCG, cement and auto sectors owing to rising input price pressures,” Edelweiss Securities said in a report.
“IT and pharma are likely to extend their strong showing, but with slower profit growth relative to the coverage universe. On a 2YCAGR basis, profits are likely to be strong in metals and banks, and weak in domestic auto, FMCG, utilities, and energy,” it said.
According to Edelweiss estimates, FY21 Nifty earnings are likely to grow by 21 per cent — the highest in a decade when nominal GDP growth has contracted.
We have collated a list of companies from various sectors that could see their net profit doubling on a YoY basis for the quarter ended March 2021.
Brokerage: Motilal Oswal
TVS Motor: PAT likely to rise by 126% YoY
Motilal Oswal, which has a neutral rating on TVS Motor, expects the latter to report a 126 per cent rise in net profit for the quarter ended March 2021, supported by strong volume growth, led by exports.
The report further added that price increases and lower discounts supported realisations. On the other hand, high raw material costs and no export incentives can lead to margin decline and EPS downgrade.
ABB: PAT likely to rise by 442% YoY
Motilal Oswal, which has a buy rating on ABB, expects the company to report over a 400 per cent rise in net profit on a YoY basis for the quarter ended March 2021, supported by rise in revenues.
Revenue is likely to increase about 19 per cent on a YoY basis on complete normalcy in operations and a low base effect, said the Motilal Oswal report. The adjusted PAT is likely to be at Rs 1 billion on operating leverage and lower tax rate on a YoY basis.
Thermax: PAT likely to rise by 187% YoY
Motilal Oswal, which has a neutral rating on Thermax, expects the engineering firm to report a 187 per cent rise in net profit on a YoY for the quarter ended March 2021, supported by rise in revenues in various segments, and strong operational leverage.
Motilal Oswal expects revenues to rise in different segments such as Energy/Environment/Chemical segments by 47 per cent, 4 per cent, and 45 per cent, respectively, YoY.
Investors should watch out for demand outlook across segments and various end markets, and updates on execution ramp-up. PAT should come in at Rs 1.1 billion (significantly higher YoY, owing to strong operating leverage and favourable base).
Dalmia Bharat: PAT likely to rise by 808% YoY
Motilal Oswal, which has a buy rating on Dalmia Bharat, expects the firm to report an 808 per cent rise in net profit on a YoY basis for the quarter ended March 2021, supported by rise in volumes.
The domestic brokerage firm estimates a 28 per cent YoY rise in volumes at 6.6 MT, but realisations could decline marginally by 0.8 per cent on a QoQ basis.
Grasim Industries Ltd: PAT likely to rise by 253% YoY
Motilal Oswal, which has a neutral rating on Grasim Industries, expects the manufacturer to report a 253 per cent rise in the net profit on a YoY basis for the quarter ended March 2021, supported by a rise in volumes.
Realisations are recovering from 2QFY21 lows for both VSF and Chemicals. The VSF/Chemicals business is likely to see a 1 per cent and 3.5 per cent YoY volume growth, respectively, said the Motilal Oswal report. It also expects an EBITDA margin of 16.9 per cent (+7.7pp YoY, -0.7pp QoQ).
Brokerage Firm: Kotak Institutional Equities
Apollo Tyres: PAT likely to grow by 252% YoY
Kotak Institutional Equities, which has a reduce rating on Apollo Tyres, expects it to report a 252 per cent rise in the net profit on a YoY basis for the quarter ended March 2021.
“We expect standalone revenues to increase by 34 per cent YoY in 4QFY21, driven by: (1) 25 per cent YoY increase in volumes, and (2) 7 per cent YoY increase in realisations. Volumes will likely increase by 25 per cent YoY, led by (1) a 10-15 per cent growth in PV and CV replacement segments and (2) >30% YoY growth in PV and CV OEM segments,” said the report.
The brokerage firm expects gross margin to decline by 490 bps QoQ, led by a sharp increase in raw material prices in 4QFY21.
CEAT: PAT likely to grow by 125% YoY
Kotak Institutional Equities, which has an ADD rating on CEAT, expects the company to report a 125 per cent rise in net profit on a YoY basis for the quarter ended March 2021.
The brokerage firm expects consolidated revenues to increase by 29 per cent on a YoY basis, led by a 33 per cent YoY increase in the standalone business due to strong growth in the replacement segment and TBR & PCR OEM segments in 4QFY21.
“We expect EBITDA margin to improve by 10 bps on a YoY basis in 4QFY21, led by operating leverage benefits, offset by a sharp uptick in the RM basket,” the report added.
Motherson Sumi: PAT likely to grow by 215% YoY
Kotak Institutional Equities, which has an ADD rating on Motherson Sumi, expects the company to report a 215 per cent rise in net profit on a YoY basis for the quarter ended March 2021.
“We estimate consolidated revenues to increase by 15 per cent YoY in 4QFY21, led by a 14 per cent YoY increase in SMRPBV and PKC revenues in Euro terms,” said the note.
Bank of Baroda: PAT likely to rise by 239% YoY
Kotak Institutional Equities, which has an ADD rating on Bank of Baroda, expects the bank to report a 239 per cent rise in net profit on a YoY basis for the quarter ended March 2021.
The domestic brokerage firm expects the trend of a strong recovery in earnings to continue in 4QFY21, largely led by lower provisions.
“We expect loan growth to be subdued at about 4 per cent, mainly due to the weak corporate credit growth. We see weak operating profit growth on lower treasury income and a modest 7 per cent YoY NII growth,” said the report.
ICICI Bank: PAT likely to rise by over 300% YoY
Kotak Institutional Equities, which has a Buy rating on ICICI Bank, expects the bank to report an over 300 per cent rise in the net profit on a YoY basis for the quarter ended March 2021.
“We expect a PPOP (Pre-Provision Operating Profit) growth of about 15 per cent YoY with revenue growth at 13 per cent YoY. Loan growth is expected to accelerate to about 13 per cent, and NIM (core) to remain stable QoQ at 3.7 per cent,” it said.
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