Research Report

Q1 FY19 results: What to expect

Gradual progress

Publish date: 10th July, 2018

Auto & auto ancillary

• What to expect: Strong growth in revenues and net profits (yoy)
• Reasons for growth: Low base due to GST and strong demand
• Top performers: Bajaj Auto (43%) and Ashok Leyland (49%)

Building material

• What to expect: The sector is likely to grow by 11% yoy
• Reason for growth: Numbers are strong when compared to the GST-affected time period
• Pain points: Rising gas prices; increased competition in tile segment; delay in implementation of e-way bill (likely to last 1-2 quarters)

Capital goods and engineering

• Current status: Getting new orders but capacity utilization remains low (71 to 74%); the power sector has remained muted
• Reasons: The capital goods segment will remain subdued until next year’s general elections; the power sector will be impacted due to low supply of fuel or SEBI’s interest to sign long-term power purchase agreements
• Outlook: We see attractive opportunities in select areas (read full report). Long-term performance is healthy too

Cement

• What to expect: Universe coverage to grow by 23% yoy
• Outlook: Cement volumes to rise due to accelerated housing and infrastructure construction; rural demand
• Pain points: Cost pressure, caused by rising fuel price and pet coke, yet to be shifted to the consumer

Construction

• What to expect: Revenues to go up (3.2%); margins to stay strong while net profits to remain stagnant
• Outlook: Positive
• Reasons: Improvement in margin, working capital cycle, rise in demand

Consumer durables

• What to expect: The AC industry is expected to show flat or negative growth this quarter
• Reasons: Relatively low demand due to thunderstorms/dust storms in north India in April and May

FMCG

• What to expect: The sector is likely to see its earnings grow by 9.24% yoy; volume growth
• Reasons: High earnings due to strong demand and healthy margin; volume growth due to uptick in rural demand and counting of the unorganized sector post-GST

Information Technology

• What to expect: Q1 is usually strong
• Reasons: Rupee depreciation, digital growth and improving margins due to high demand

Logistics

• What to expect: Low double-digit growth in revenues
• Reason: High port volumes (Adani Port and SEZ between 10 and 15%)

Metals and mining

• What to expect: Companies in ferrous space to report strong earnings; non-ferrous companies to remain muted
• Reason: Ferrous companies benefit from rupee depreciation and high realization; non-ferrous companies experience headwinds due to rise in costs

Oil and gas

• What to expect: OIL India to have low realization because there may be a subsidy burden on PSU upstream companies; Refining margins to remain low due to fall in petrol and jet crakes; gas production to decline marginally

Paints

• What to expect: Low double digit growth
• Reasons: Government infrastructure work, improving income levels and launches in the auto sector

Also read

• 5 interesting takeaways from Reliance AGM
• 3 reasons rising oil prices bother India
• Want financial guidance with your investments? Click here
• Why we have a BUY rating for Ashok Leyland
• Investment lessons from the football field

Read full report    Trade now    Read latest articles

Don't have an account? Click here to open an account