While the upcoming earnings season is likely to be muted, some stocks may see worse performance this quarter. Ten stocks are expected to report a loss in the October-December quarter despite corporate tax cut announced by union finance minister Sitharaman in September, according to a Motilal Oswal report.
Various stimulus measures have failed to show any visible impact on demand so far, hence the third quarter (Q3) earnings are unlikely to show a recovery, the brokerage said.
The impact of CAA protests on the economy, tight liquidity, the prolonged effect of demonetisation and GST drag will also be visible in the quarter,
another brokerage Prabhudas Lilladher said in its earnings preview report.
However, Motilal Oswal expects a revival in the economy in calendar year 2020 (CY20). The government and the RBI have taken some steps to revive growth, the effect of which will be visible with a lag. Meanwhile, some sectors are showing signs of stability/bottoming out. It estimates the overall PAT (profit after tax ) of companies to increase by 9 percent year-on-year (YoY), led by
BFSI, automobile, and consumer, while, metals, oil & gas are likely to drag the performance, given the underlying weak commodity price.
In metals sector, no stock is expected to post a rise in profit in the quarter, according to the report. Revenue for steel companies is expected to decline as lower steel prices to seep in and impact profitability. Fall in prices of other base metals will also affect the profits.
Three stocks -- Tata Steel, SAIL, and JSPL -- are likely to report loss in Q3, the brokerage said.
Tata Steel is expected to post a loss of Rs 463 crore in the October-December quarter compared to a Rs 1,701 crore in Q3FY19. The company's net sales is also likely to decline 19 percent to Rs 33,439 crore. SAIL, on the other hand, will also post a loss of Rs 370 crore in Q3 against a profit of Rs 616 crore in the year-ago quarter, according to the report. Sales may also decline 13 percent to Rs 13,764 crore, it added. JSPL was another metal stock which, according to the report, will witness a loss of Rs 340 crore against a profit of Rs 279 crore in Q3FY19.
Another such sector is Telecom. The stress in the telecom sector has called for combined efforts by both the government and telecom companies to clear the financial mess, the report said. However, it added that the recent 25 percent price hike, passing of IUC (interconnection usage charge) to customers are all expected to revive earnings growth in Q3FY20.
Bharti Airtel is likely to post a loss of Rs 414 crore in this quarter, compared to a profit of Rs 86 crore in Q3 FY19, said the brokerage. But, the telecom company is expected to rise 8.3 percent to Rs 21,915 crore, it added. Vodafone Idea also may see a loss of Rs 4,171 crore in Q3 against a loss of Rs 5,004 crore in the year-ago quarter, the report stated.
While other oil & gas stocks are expected to rise in Q3,
MRPL is likely to post a loss of Rs 253 crore in the October-December quarter compared to a loss of Rs 267 crore in the same quarter last year.
Public sector banks, barring SBI, are also likely to reflect weak trends. According to the brokerage, weakness in PSU banks’ earnings as sluggish loan growth, higher slippages (mainly caused by stressed HFCs) and divergence in gross non-performing loans are likely to keep credit costs elevated.
Bank of Baroda is likely to post a loss of Rs 563 crore compared to a profit of Rs 471 crore in the year-ago quarter, the Motilal Oswal report noted. The gross NPA is also slated to increase by 10 percent to Rs 69,000 crore in Q3, it added. The report noted that divergence in provisioning to keep credit costs elevated. Indian Bank's net loss in Q3 is going to be about Rs 119 crore, according to the report. In Q3FY19, the bank reported a profit of Rs 152 crore.
The other two stocks that may report a loss in the coming quarter are from the cement space -- Dalmia Bharat and India Cements. This is due to weak demand in October and November on account of weak construction activity, the report said. Demand has, however, improved in December supporting overall volume growth in the quarter, it added.
Dalmia Bharat may post a loss of Rs 18 crore in Q3FY20 against a profit of Rs 31 crore in the same quarter last year. Sales, meanwhile, is likely to rise by 4.6 percent for the quarter to Rs 2,263 crore. India Cements is expected to post a loss of Rs 3.7 crore in Q3 against a profit of Rs 3 crore in the year-ago quarter. Sales will also fall 4 percent to Rs 1,258 crore, the report said.
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