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3QFY2011 Sectoral Outlook (CLICK on sector to get details)
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3QFY2011 Sectoral Outlook (CLICK on sector name above to get details)
3QFY2011 Sensex earnings outlook
For 3QFY2011, we expect the Sensex companies to report a
robust 19% yoy performance on the sales front. On the
bottom-line front, the performance is expected to be even better,
with a yoy growth of 26%. However, operating margins are
expected to remain more or less flat for the quarter and increase
by a mere 8bp. Overall, we expect OPM to come in at 21.7%,
while NPM is expected to increase to 11.7% vis-à-vis 11.1% for
the corresponding period of the previous year.
The oil and gas, auto and metals sectors are set to post
robust numbers for 3QFY2011. The oil and gas sector is
expected to be the major contributor to the growth in Sensex
sales and profit, with a 20% and 47% growth in sales and
profit respectively, mainly on the back of the 80bp expansion
in margins and 79% increase in profit of ONGC. Ex-oil and
gas, growth in Sensex sales and earnings is expected to be
13.8% and 17.2%, respectively. The auto companies are
expected to report 69% yoy increase in net profit in
3QFY2011, led mainly by Tata Motors, which is expected to
report a 146bp increase in OPM and 195% rise in net profit.
Overall, the auto sector is expected to report 18% growth in
sales for the quarter. Metals are expected to report 52%
jump in net profit, despite the mere11% yoy increase in
top-line, mainly on account of margin expansion. We expect
overall OPM of the sector to come in at 14.8%
for 3QFY2011.
The capital goods sector is expected to report a strong 27%
growth in top-line. However, net profit growth is expected to
be subdued due to margin compression by 131bp. The BFSI,
FMCG and IT sectors are expected to report growth rates
similar to the Sensex. Top-line growth of BFSI sector is
expected to come in at 18%, while a 15bp increase in OPM
would result in 22% yoy increase in bottom-line. The FMCG
companies are set to post 16% yoy growth in top-line, driven
primarily by robust volumes. On the bottom-line front,
growth is expected to be 14%. The IT sector is expected to
post 25% yoy growth during the quarter, primarily driven by
higher volumes and favourable cross-currency movements.
However, high wage inflation would exert pressure on
margins, which are expected to decline by 140bp. Overall,
the IT companies are expected report earnings growth of
17% for the quarter under review.
During 3QFY2011, the telecom and power sectors are
expected to be the main underperformers, despite strong
top-line growth. Telecom is expected to report a strong 35%
yoy increase in sales, partially because of the inclusion of
Zain's numbers in Bharti's accounts. However, owing to a
413bp decline in OPM resulting from the price wars that
have intensified, bottom-line is expected to reduce sharply
by 44%. The decline in margins is expected to hit the power
sector too. Net profit is expected to remain flat despite a
24% increase in top-line, as margins are expected to correct
by 347bp owing to low merchant power rates and high fuel
cost.
In the pharmaceutical sector, Cipla is expected to report a
9% decline in net profit, as margins decline by 70bp.
Similarly, DLF, the only real estate sector representative on
the Sensex, is expected to be impacted by a higher debt
burden and report flat profit growth despite a strong 25%
growth in top-line. JP Associates in the construction sector is
expected to report a substantial 218% spike in profit for
3QFY2011.
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