Amidst rising demand and economic activity, brokerages project India Inc to grow its revenues at a healthy rate of over 20 per cent. However, there are concerns on the profit growth as some brokers do not see a good prospect due to a high input cost.
Brokerages expect revenue growth to be driven by automobile, capital goods, construction, metal and pharma sectors while they predict a bad performance by the telecom and the cement sectors.
“The growth in the earnings of the Sensex companies would be achieved mainly on the back of a relatively better performance of the metal and capital goods sector. Telecom and cement sectors are likely to act as a drag on the Sensex earnings,” said a report by Sharekhan that projected a revenue growth of 22.5 per cent for the Sensex companies and a profit growth of 28.6 per cent.
Edelweiss expects profits for Sensex companies to grow by 6 per cent. The brokerage sees a contraction in operating margins by 367 basis points (100 basis point is one percentage point) on a year-on-year basis.
“This contraction in margins is expected to be led by companies in the telecom and cement sectors,” said the Edelweiss research report.
While year-on-year growth is likely to remain strong, brokerages see a weak quarter-on-quarter performance.