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Q4 earnings to be boosted on low base of Demonetisation and GST

Q4 earnings to be boosted on low base of Demonetisation and GST

Q4 earnings to be boosted on low base of Demonetisation and GST
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By CNBC-TV18 Apr 11, 2018 3:32:28 PM IST (Updated)

The brokerage said that the earnings growth will be at 17%, while the domestic revenue growth will be at 10% year-on-year which is expected to be a six-month high.

Fourth quarter earnings in most of the sectors will be better-than-expected, helped by a demonetization and Goods and Services Tax (GST) – hit low base, CLSA said in a note.

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The brokerage said that the earnings growth will be at 17%. Domestic revenue growth will be at 10% year-on-year, which is expected to be a six-month high.
The auto sector is expected to report 18% growth in the quarterly earnings. CLSA added that, Tata Motors' earnings might be hurt following a weak trend as the Jaguar Land Rover's retail volumes fell by 8% year-on-year to 83,732 units in March 2018.
The auto makers performance lagged the most in the UK and Europe as a steep decline was seen in the diesel vehicle sales.
The consumer or FMCG sector will also post a 18% rise in the fourth quarter, after being worst hit by demonetisation and GST related hiccups. The key expectation from this quarter, is sustained recovery and positive management commentary.
CLSA added that domestic sectors like real estate is expected to post 63% of earnings growth as various real estate companies are encouraging pre-sales of properties like Sobha Ltd.
The banks will report a 46% decline in the quarter, hurt by higher non-performing assets (NPA) provisioning, CLSA said. Corporate banks are expected to witness higher provisioning, driving potential earnings downgrades.
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Earnings will decline 20% in the pharma sector for companies like Sun Pharma and Lupin, as they face the brunt of the pricing pressure in the U.S as well as outstanding regulatory issues, especially by The Food and Drug Administration (US FDA) on plants.
"Analysts expect low single digit revenue growth, with revenues from the US – a vital market – likely to decline for the fifth consecutive quarter due to faster drug approvals resulting in more competition and consequently pressure on price margins," a report said.
However, 10% rise will be seen in the domestic markets for the drug companies as operations normalises post GST and demonetisation.
The intense competition faced from Reliance Jio's entry into the market has caused Bharti Airtel to report its first ever quarterly loss in over 15 years and Idea to post its sixth consecutive loss, CLSA said.
The average revenue per user (ARPU) will continue to slip in the upcoming quarter, despite strong subscriber addition on account of migration of Aircel and Reliance Communications’ (RCOM) subscribers, Edelweiss said in a note.
 
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