Corporate profitability will continue to be under pressure for second quarter of fiscal year 2011-12 as higher input costs, and higher interest rates squeeze margins, say reports from brokerages.
“Margin pressures have dented the profitability of Indian corporates over the past few quarters and are likely to continue in 2QFY2012 as well. While top line growth for Sensex companies is expected to remain healthy at 21.1 per cent y-o-y (muted 2.6 percent q-o-q), margin pressures are likely to result in PAT growth falling to sub-10 per cent (at 8.2 per cent) level,” said a report from Angel Broking.
According to CRISIL, corporate India is expected to report a significant moderation in revenue growth and lower EBITDA margins in the September 2011 quarter. The report says this is a result of decline in consumer confidence, high inflation and rising interest rates and slowdown in investment growth.
“Sales volumes in consumption-linked and interest rate sensitive sectors such as automobiles, real estate, textiles, and retail have been significantly impacted. In infrastructure-linked sectors such as cement, capital goods, and construction as well, order book/volume growth has declined. We anticipate this slowdown to manifest in significantly muted top line growth during Q2 FY12,” explained Prasad Koparkar, Head - Industry and Customised Research, CRISIL Research.
Auto, metals, telecom and property are expected to see an earnings decline. Power and pharma, on the other hand are seen to witness an increase in their earnings numbers.
“Sectors like automobile, capital goods/infrastructure, metals and telecom will report revenue growth but the same will not reflect on their profitability as high capex, high working capital, high interest rates and one-offs will spoil the show,” said an ICICI Securities report.
BANKING
The banking sector is expected to show a mixed performance. Private banks are expected to show better performance than their PSU counterparts as the pressure on asset quality and provisioning is higher in case of the PSU banks, said analysts.