Warning signs: These 10 companies' March quarter profit is likely to fall over 50% YoY

March quarter is likely to see a decline in the earnings growth for most of the sector amid COVID-19 outbreak, and the tremors are likely to be felt in the forthcoming quarters as well, fear experts.

Kotak Institutional Equities expects high double-digit YoY decline in net income for several sectors: (1) automobiles (steep decline in volumes), (2) construction materials (sharp volume decline in March 2020), (3) metals & mining (sharp decline in realizations, profitability, and volumes) and (4) oil, gas & consumable fuels (lower realization for upstream companies and inventory loss for downstream companies).

On the other hand, banks may lower provisions due to high provision coverage ratio and higher treasury income, and pharmaceuticals led by domestic formulations might report healthy earnings growth.

The domestic brokerage firm expects the net profits for the BSE-30 Index to increase 12 percent YoY and that of the Nifty-50 Index to decline 16 percent YoY.

The big clue for the upcoming quarters will come from management commentary. Investors are advised to watch out for guidance and commentary for the upcoming quarters is likely to guide stock performance.

“The March ending quarter wouldn't show much of an impact for businesses because we really entered the lockdown at the end of the quarter. Most manufacturing businesses would have inventory & operations wouldn't have been disrupted until the quarter ended,” Raunak Onkar, Fund Manager, PPFAS Mutual Fund told Moneycontrol.

“However, the commentary is what you'd expect, owing to the uncertainty, most have refrained from giving any revenue or profit guidance for the year. Being cautious and focused on keeping the employees safe and business running seem to be on the top of everyone's mind,” he said.

We have collated a list of 10 stocks that are likely to see more than 50 percent year-on-year (YoY) fall in the net profit for the March quarter:

Brokerage Firm: Motilal Oswal

Bharat Forge: PAT likely to fall by 69% YoY

Motilal Oswal sees the net profit of Bharat Forge to decline by 69 percent on a year-on-year basis for the quarter ended March, it said in a note. The fall in the bottom line could be due to a weak outlook for CV, as well as Shale Oil amid the COVID-19 outbreak.

The adverse mix and operational deleverage are likely to hurt margins. Going forward, the PV segment and light-weighting vehicles are likely to drive growth.

Mahindra & Mahindra: PAT likely to fall by 60% YoY

Motilal Oswal sees the net profit of Mahindra & Mahindra to decline by 60 percent on a year-on-year basis for the quarter ended March, it said in a note. The domestic UV & PV market share continues to erode and that could impact revenue growth.

Fall in volume is likely to adversely affect margins. EPS downgrade is to account for COVID-19 impact, but the tractor segment could be get least impacted by the outbreak.

Motherson Sumi: PAT likely to fall by 60% YoY

Motilal Oswal sees the net profit of Motherson Sumi to decline by 60 percent on a year-on-year basis for the quarter ended March, it said in a note as exposure to developed markets is to hurt performance.

The EU business was operational up to 20th March only. High operating leverage is likely to hurt, resulting in an EPS cut.

IndusInd Bank: PAT likely to fall by 82% YoY

Motilal Oswal sees the net profit of IndusInd Bank to decline by over 80 percent on a year-on-year basis for the quarter ended March, it said in a note. The loan growth is likely to moderates sharply led by overall slowdown while deposits could also witness reduction on QoQ basis.

The brokerage firm estimates a contraction in margins to 4 percent, and the asset quality is also likely to deteriorate led by higher slippages and strain on MFI and auto business.

RBL Bank: PAT likely to fall by 88% YoY

Motilal Oswal sees the net profit of RBL Bank to decline by over 80 percent on a year-on-year basis for the quarter ended March, it said in a note as the loan growth is likely to moderate led by the weak environment.

The asset quality is likely to deteriorate due to exposure toward MFI/credit cards and few other stressed accounts. “As the bank witnessed the withdrawal of deposits, liquidity positioning would be a key monitorable,” said the note.

Brokerage Firm: Kotak Institutional Equities

TVS Motor Company: PAT likely to fall by 59% YoY

Kotak Institutional Equities sees the net profit of TVS Motor Company to decline by nearly 60 percent on a year-on-year basis for the quarter ended March, it said in a note.

Volumes are likely to decline by 25 percent on a YoY basis, due to a 30 percent decline in domestic markets and a 2 percent YoY decline in the export markets.

“We expect revenues to decline by 28% YoY in 4QFY20 largely led by 30% YoY decline in volumes offset by a 3% decline in ASPs YoY,” said the note.

Dalmia Bharat: PAT likely to fall by 97% YoY

Kotak Institutional Equities sees the net profit of Dalmia Bharat to decline by over 90 percent on a year-on-year basis for the quarter ended March, it said in a note.

The domestic brokerage firm expects a 10 percent YoY volume decline in 4QFY20, factoring the COVID-19-led countrywide lockdown in the last week of the quarter, which is typically the peak sales period for the sector.

“We expect blended realizations to increase by 2.8% QoQ led by improved pricing in East and South markets,” the note said.

Grasim Industries: PAT likely to fall by 72% YoY

Kotak Institutional Equities sees the net profit of Grasim Industries to decline by over 70 percent on a year-on-year basis for the quarter ended March, it said in a note.

“We model volumes to decline in VSF operations by 10% YoY to 135,000 tons and witness a 10% YoY decline in chemical operations at 235,000 tons factoring the countrywide lockdown with the outbreak of COVID-19,” added the note.

Orient Cement: PAT likely to fall by over 70% YoY 

Kotak Institutional Equities sees the net profit of Orient Cement to decline by over 70 percent on a year-on-year basis for the quarter ended March, it said in a note.Kotak Institutional Equities expects a 15 percent YoY volume decline in 4QFY20, factoring the COVID-19-led countrywide lockdown in the last week of the quarter, which is the peak sales period for the sector.“We expect blended realizations to increase by 2.9% QoQ led by improved pricing in West and South markets,” said the note.

Apollo Hospitals: PAT likely to fall by 51% YoY Kotak Institutional Equities sees the net profit of Apollo Hospitals to decline by over 50 percent on a year-on-year basis for the quarter ended March, it said in a note.Kotak Institutional Equities expects the revenue growth of 10 percent on a YoY basis, primarily driven by 20 percent YoY growth in the pharmacy segment.

“We expect the healthcare business to post 1 percent YoY growth due to COVID-19-related impact on international patients, OPD and elective surgeries in March. Within healthcare, we expect existing centers to decline by 2 percent YoY,” the note added.

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