Nifty 50 earnings to rise but demand view crucial


Cogencis, Tuesday, Jan 12, 2021

By Apoorva Choubey

MUMBAI - The normalisation of the economy, higher product prices, and cost-reduction measures will help companies in the Nifty 50 index improve net profits for the December quarter but their commentary on sustenance of demand may hog the spotlight.

Corporate India's realistic assessment of demand could assume higher significance for the market because the revival in many businesses has been driven by the festival season and pent-up demand over the past three months.

The Demand Revival Will Also Dictate The Ability Of Companies To Pass On The Impact Of A Spike In Raw Material Prices.

India's largest car-maker, Maruti Suzuki India, expressed doubt over sustenance of demand in the long term once the pent-up effect of the pandemic-induced lockdown fizzles out, according to a report on Business Standard today.

While property registrations, goods and services tax collections, electricity demand and other high-frequency indicators are evidence that domestic economic activity is inching closer to pre-pandemic levels, the full impact of COVID-19 on income losses and other disruptions will play out in the coming months, experts said.

The rebound in the economy still faces risks from the aversion of individuals to public places, elevated inflation and the possibility of lower exports due to the new strain of the coronavirus, which has resulted in fresh restrictions in Europe and some other regions. 

The demand revival will also dictate the ability of companies to pass on the impact of a spike in raw material prices. In case companies are not able to hike prices to the extent that input costs are rising, their profitability may take a hit.

What's more, the health of the banking sector--which has the highest weight in India's headline indices--depends on the revival of demand, especially in stressed sectors such as aviation, tourism, and infrastructure.

In its Financial Stability Report on Monday, the Reserve Bank of India cautioned that gross non-performing assets ratio in the banking system could climb to 13.5% by September from 7.5%.

While the outlook for lenders for 2021 is murky, double-digit loan growth, non-recognition of some fresh slippages because of government directives and bounce-back in collections could lead to an 8% rise in the Oct-Dec net income of the six banks on the Nifty 50 index.

Their net profit, though, is seen 4% lower on year as most lenders will want to shore up provisions to brace for higher bad loans in the coming months. 

The other sectors that will pilot sales and profit growth for Nifty 50 companies are automobiles and metals. Pent-up and festival season demand for automobiles due to preference for personal mobility, and a revival in light commercial vehicle sales may lead to an 18% surge in the combined sales of the six automobile companies on the benchmark.

Their net profit is seen growing at an even higher pace of 53% due to the impact of a low base last year, higher product prices following tighter emission norms, and impressive cost-reduction measures by automakers.

The net profit of metal and steel producers may double from a year ago because of product prices surging to multi-year highs during the quarter, led by a swift revival in global industrial demand, a pick-up in construction activity, and a revival in automobile sales. The combined sales of Hindalco Industries, JSW Steel and Tata Steel are seen 13% higher on year. 

The outperformers of the previous two quarters--information technology and pharmaceutical sectors--will also continue to witness substantial growth in earnings.

With the pandemic having accelerated the demand for cloud and digital adoption around the world, the revenue of India's largest information technology companies may grow 4% on year and 3% on quarter. Their bottomline is likely to rise 7% and 8% on a year-on-year and sequential basis, respectively.

Tata Consultancy Services reported its earnings on Friday. Its sales rose higher than expected at 4.1% sequentially in constant currency terms. 

Pharmaceutical companies will reap the benefits of a revival in the Indian market as well as US generics, while cement producers may see healthy earnings on account of a demand recovery and a rise in product prices.

Among other large sectors, oil and gas companies are expected to see a fall in both income and bottomline, as their businesses have not recovered to pre-pandemic levels yet. Mobility in the country is still subdued while crude oil prices remain sharply lower than a year ago even as they have risen sequentially.

Overall, the combined net profit of Nifty 50 companies for the December quarter may rise 4% on year, with sales growth of 1%, data compiled from earnings estimates of 22 brokerage houses showed. These include the estimates for TCS.

The earnings of Nifty 50 companies are well on track to achieve the consensus estimate of 5% net profit growth in 2020-21 (Apr-Mar) and a significant beat in the December quarter may lead to upgrades in future estimates, said brokerage house Edelweiss Securities.

The Nifty 50 rose around 24% in the December quarter due to easy global liquidity, hope of an earnings recovery, and a revival in sentiment due to progress in vaccine development.  

Following are the Oct-Dec consensus earnings estimates for companies that constitute the National Stock Exchange's Nifty 50 index. These estimates are based on reports compiled by Cogencis from 22 brokerage houses. 


Company  Sales       PAT  Sales    PAT  Sales    PAT    EBITDA  Result
 ------Average------------(Y-o-Y)----------(Q-o-Q)-----Mln Rupees    date
 -----Mln Rupees-------------------% Change--------------  
Bajaj Auto90,02814,2591813262515,788Jan 21
Eicher Motors +28,5725,476211034596,881     --
Hero MotoCorp96,3259,4583873(1)12,834     --
M&M (MVML)1,40,19716,404163312191423,722     --
Maruti Suzuki2,36,74519,7931426264426,294     --
Tata Motors +8,36,58731,214178056    N.A.1,03,847Jan 29
AXIS Bank *75,46722,9891731337     N.A.Jan 27
HDFC Bank *1,61,09276,29914322     N.A.Jan 16
ICICI Bank *95,96044,19812724     N.A.Jan 30
Kotak Mahindra *39,16919,32514210(12)     N.A.     --
SBI *2,83,40142,3282(24)1(7)     N.A.     --
IndusInd Bank*32,9805,2087(60)1(20)     N.A.     --
Grasim Industries38,1742,244(15)2111(38)5,312     --
Shree Cement32,0405,36012736(2)9,704     --
UltraTech Cement1,11,21912,764119811626,479     --
UPL +97,2459,20293199922,335     --
L&T +3,79,56922,8395(3)22(59)41,098Jan 25
Bajaj Finance*38,75412,7087(15)1445     N.A.Jan 20
Bajaj Finserv +*43,17112,453(5)(23)429     N.A.Jan 20
HDFC *39,79826,97524(68)10(6)     N.A.Feb 02
HDFC Life Insurance Co#94,8243,3762135(6)3     N.A.Jan 22
SBI Life Insurance Co#1,31,0004,5001215250     N.A.     --
Britannia Industries +32,5874,318916(5)(13)5,715     --
Hindustan Unilever 1,17,90221,01920303529,590     --
Nestle India35,0635,3301113(1)(9)8,115     --
ITC1,17,62636,272(0)(12)51244,204     --
HCL Tech +1,90,99331,894583148,798Jan 15
Infosys +2,53,02550,86010143571,301Jan 13
TCS +4,12,66884,363443131,13,539Jan 08
Tech Mahindra +95,48911,466(1)02816,891Jan 30
Wipro +1,55,35125,664043434,255Jan 13
Titan Co72,3435,7981723681918,631     --
Hindalco Industries3,27,49818,4661274537748,857     --
JSW Steel +2,09,74026,203161,14296457,289Jan 22
Tata Steel +1,66,07417,1869(5)1(22)54,996     --
OIL & GAS        
BPCL6,62,90124,274(11)9332839,746     --
GAIL 1,67,25815,144(6)21232221,470Jan 15
Indian Oil Corp10,44,54354,176(16)13222(13)86,176     --
ONGC1,70,33025,858(28)(39)1(10)75,788     --
Reliance Ind7,01,98240,300(19)(58)25(38)80,734     --
Cipla +49,7846,3161480(1)(5)11,299Jan 29
Divi's Laboratories16,7574,4022122(2)(14)6,391     --
Dr. Reddy's Lab +49,0606,84912    N.A.(0)(11)21,045Jan 29
Sun Pharma +86,90314,1497552(22)21,960Jan 29
POWER & ENERGY        
NTPC 2,44,05334,544415(1)(1)76,492     --
Coal India +2,34,88740,66814113847,127     --
Power Grid94,66130,5235145(2)83,637     --
Bharti Airtel +2,57,83825817    N.A.(0)    N.A.1,14,287     --
Total2,57,83825817    N.A.(0)    N.A.  
Asian Paints +60,9129,4451224141414,147Jan 21
Adani Ports and SEZ +40,16515,024201138826,615     --
Nifty Total91,90,70910,80,13714156  


Company    Sales   Cogencis     PAT   Cogencis     EPS  Result 
    estimates  estimates  (in Rs)    Date
TCS +4201504,12,66887,01084,36323.19Jan 08


+ Consolidated Figure 
* Net interest Income 
Y-o-Y: Year-on-Year 
Q-o-Q: Quarter-on-Quarter
N.A.: Not Available 
Rs: Rupees 
Estimates from: 

Ambit Capital Pvt Ltd, Anand Rathi Share and Stock Brokers Ltd, Antique Stock Broking Ltd, Axis Capital, BOB Capital Markets Ltd, Dolat Capital Market Pvt Ltd, Edelweiss Securities Ltd, Elara Capital,  Emkay Global Financial Services Ltd, HDFC Securities Ltd, ICICI Research, ICICI Securities Ltd, IDBI Capital Market Services Ltd, JM Financial Institutional Securities Pvt Ltd, Kotak Institutional Equities, Maybank Kim Eng Research, Motilal Oswal Securities Ltd, Nirmal Bang Equities Pvt Ltd, Nomura Equity Research, PhillipCapital (India) Pvt Ltd, Prabhudas Lilladher Pvt Ltd, Sharekhan Ltd.


Complied by Shivaji Jagtap 

Edited by Aditya Sakorkar

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