Q1FY13 - WHAT TO EXPECT?

By Ruma Dubey

Its once again results time. 30thJune is over and gone and lie always, markets are now training their eyes on Q1FY13 numbers to get cues for the future.

Q1 numbers are not crystal gazing; it is more about looking into the past three months and it is the past experience which is expected to give cues for the coming months.  Today, the moods might be a bit more optimistic than what they were last month but that does not mean that the numbers for Q1 will come in great. The first three months of the current fiscal were troubled, with rupee v/s the US dollar slipping to its lowest ever levels, inflation remaining high and demand showing a slowdown. It has also been a time of extreme global uncertainty and deteriorating Euro crisis. Thus in this background, to expect India Inc to come out shinning would be naïve or rather foolish.

Globally too, this is results time, Q2 numbers  and that too will set the mood in the coming days. Some 42 companies have already warned investors that profits will be lower than expected mainly due to slowing demand from customers around the world, particularly in Europe. For Facebook, it will be the first time after going public and for JP Morgan, after the huge losses declared last month.

Results of some relatively small companies for Q1 have already come in and they do not look too bad. But those do not give us cues into the future. Today, Indusind Bank is scheduled to announce its numbers and tomorrow it will be HDFC. On 12th we have the two big wigs of IT – Infosys and TCS and that, to some extent will give us an insight into the sector.  On 13th there is HDFC Bank. So by the end of this week, we will have three big private sector banks/institution numbers. In banking, the four factors to keep a watch on would be the spreads, loan growth, asset quality and guidance.

The market is bracing for the worst when it comes to the IT sector and expects Infosys to post a flat set of earnings and also a cut in its earning estimates for FY13. Compared to that, market expects TCS to do much better, infact much better than the rest.  But given the sharp depreciation of the rupee, their rupee earnings are bound to show a spike up if accompanied with volume growth.

The mover and shaker of the market – Reliance Industries is largely expected to disappoint as it already announced a drop in natural gas output to 30.82 million standard cubic meters per day from 31.57 mmscmd. Last fiscal, the company had declared its Q1 numbers on 25th July; it is yet to announce its date for this fiscal.

In Q1FY13, raw material costs may not be a high cause for worry as commodity prices have eased a bit; the worry is not as acute as in FY11 and FY12 but yet worry about costs remains intact. It has only been further aggravated due to higher interest outgo costs and in many cases, falling demand. IIP numbers have more or less shown us what to expect – a growth rate which is slowing down.  

Telecom could be the surprise in the pack. With companies hiking rates and subscription base also showing a rise, this sector could punch in a set of good numbers, a sliver of which we saw in Q1FY12 too.  Auto could be subdued while auto ancillaries, the momentum could see them through even in Q2. Cement numbers could be good as till then CCI was yet to crack its whip and cement companies made merry with high prices. Realty companies too could show poor numbers but sale of assets by many could boost keep the bottomlines from getting dunked in the red. Private banks could show good numbers, keeping up the robust performance. FMCG too are expected to show a set of good numbers. Hospitality and airlines could show signs of trouble as seasonally, the first half it not their best. Tyre companies which were amongst the worst due to soaring rubber prices, could see some improvement as prices have eased. Metal companies could see lower realisations and mining sector continues to remain clogged.

Agro based companies, especially like fertilizers, especially gas based and pesticide companies usually have the best performance in Q1 and Q2. Capital goods companies are expected to remain muted – though order intakes have been pretty robust and one only hopes that execution has also kept pace. In commodity specifically, watch out for results of rice and tea companies.

Bottomline – Q1 could have more of a negative bias but the good part – things seem a bit optimistic now and hopefully we will see this percolate down to the numbers in the coming months.