Despite most analysts expecting another muted quarter in Q3, according to a report by Motilal Oswal, some stocks are likely to outperform massively and more than double their profit in the October-December quarter.
According to experts, various stimulus measures have failed to show the impact on demand so far, hence Q3 earnings are unlikely to show a recovery.
The quarter will also show the impact that the CAA protests had on the economy, tight liquidity, the prolonged impact of demonetisation and the GST drag, another brokerage
Prabhudas Lilladher said in its earnings preview report. However, rising crop prices and good rabi sowing have revived hope of a rural demand pickup towards the fag end of 4QFY20, it added.
Motilal Oswal expects a revival in 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 with support from festive season demand and few macro indicators like Services PMI have also bounced, the brokerage further noted.
It estimates the overall PAT of companies to increase by 9 percent YoY, led by
BFSI, automobile and consumer, while, metals, oil & gas are likely to drag the performance, given the underlying weak commodity prices. Here is the list of stocks that are likely to double profit in Q3. However, one must take note that the corporate tax rates in Q3 FY20 and Q3 FY19 differ, post the tax rate cut announced by union finance minister Sitharaman in September. Blue star
As per the brokerage, the company's PAT is expected to surge 626 percent in Q3 to Rs 45 crore as against a loss of Rs 9 crore in the year-ago quarter. Sales are also likely to rise by more than 12 percent YoY to Rs 1,237 crore.
It added that the rupee appreciation of 1.2 percent YoY against the dollar can potentially have a positive impact on earnings of Blue Star due to its reliance on imports of compressors and indoor units from China.
Motilal Oswal estimates the net profit of the company rally 230 percent on a year-on-year (YoY) basis to Rs 90 crore as against Rs 27 crore in Q3FY19. Meanwhile, sales could also go up almost 7 percent YoY to Rs 1,664 crore for the quarter ended December.
The brokerage further noted that consolidated cement volumes are likely to rise 4 percent YoY to 3.34 mt, adding that better prices in north and central to be offset by weaker prices in the east.
The brokerage firm expects blended EBITDA/tonne at Rs 946 and suggests investors watch out for an update on capacity expansion/timelines.
The private sector lender is another stock that is expected to rise over 100 percent in Q1. The brokerage estimates its net profit to jump 145 percent on a year-on-year (YoY) basis to Rs 3,940 crore as against Rs 1,600 crore in Q3FY19.
It also expects margins to improve 3.4 percent in Q3 as estimates gross slippages at 2.5 percent annualised. Net stressed loans may also decline from the current 3 percent as loan growth will be driven by retail and SME loans, it added.
Net profit for Laurus Labs could well grow 157 percent to Rs 45 crore as against Rs 18 crore in the year-ago quarter. Sales, on the other hand, is estimated to rise 29 percent YoY to Rs 685 crore.
The brokerage added that the company is expected to deliver strong YoY growth led by the superior execution and formulation segment.
As per the brokerage, the net profit of Strides Pharma may surge 136 percent YoY to Rs 56 crore versus Rs 24 crore in Q3 FY19. However, sales are expected to decline 3 percent YoY to Rs 762 crore.
Motilal Oswal expects the company to maintain momentum in its US business. It assed that a superior product mix will likely drive margins. Investors should watch out for updates on the upcoming ANDA approval pipeline, said the report.
The net profit of BPCL is likely to grow 124 percent YoY to Rs 1,110 crore versus Rs 500 crore in the year-ago quarter. Revenue, however, is expected to contract 19 percent YoY to Rs 64,030 crore for the quarter ended December.
It noted that refinery throughput is estimated at 7.5 mmt, lower QoQ due to BS-VI up-gradation shutdown at Mumbai refinery. Motilal Oswal expects poor GRM (core at USD1.4/bbl), with inventory gain (of 0.7/bbl). Despite poor GRMs, marketing margins were healthy (estimated at INR5.0/lt), it added.
Motilal Oswal estimates the net profit of HPCL may rise 586 percent YoY to Rs 1,700 crore versus Rs 250 crore in the year-ago quarter. Revenues, meanwhile, is expected to contract 18 percent YoY to Rs 58,910 crore for the quarter ended December.
The brokerage models poor core GRM YoY and QoQ at $1.4/bbl with an inventory gain of 0.7/bbl, however, the marketing margin for the quarter was healthy and it is expected at Rs 5.1/litre. It added that concerns about huge capex and execution risk at Vizag prevail.
As per the brokerage, the company's net profit could grow 178 percent in Q3 to Rs 1,990 crore versus Rs 1,340 crore in the year-ago quarter. Sales will, meanwhile, decline 15 percent to Rs 1,18,330 crore.
IOC is going to report the highest inventory gains led by crude price movement owing to its inventory cycle, said the brokerage, adding that it expects core GRM at $1.4/bbl with an inventory gain of $1.2/bbl.
Refinery throughput is estimated at 18.2 mmt owing to various precautionary shutdowns due to protest in Assam, it noted. and further said that it models in nil subsidy for the quarter and IOC remains its top pick among the pack.
The brokerage estimates the company's net profit to rise 119 percent in Q3 to Rs 399 crore versus Rs 182 crore in the year-ago quarter. Sales are also expected to rise 14 percent to Rs 1,791 crore.
NHPC’s PAT should see a sharp YoY rise on a low base as the previous year included the impact of pay revision hike, the brokerage stated.
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