The fourth quarter results for the financial year 2010-11 will kickstart with Infosys results on Friday. But markets are apprehensive about the outcome as macroeconomic factors like high inflation, high interest rates and rising crude oil prices are likely to eat into the company’s bottomline.
Industry experts feel that revenue growth and profit figures for large companies are expected to be good. Motilal Oswal Financial Services expects the profit of Sensex companies to grow by 19% in the quarter ended March 2011."Sensex profit after tax (PAT) growth is expected to be 19% year on year. Financial sector PAT will grow at 27% and contribute 21% to aggregate PAT, while IT earnings growth will be at 19%," said a Motilal Oswal Financial Services report.
However, brokerage houses feel that there will be a moderation in the numbers for mid cap and small cap companies.
ICICI Direct has projected a decline of 7.7% (year on year) in the profit growth of all companies under its coverage driven by the impact of rising borrowing cost on the midcap companies. It has projected a revenue growth of 20% for the group of companies under coverage.
“Rising borrowing costs, mainly for mid caps, will dent the profitability. We expect the large cap stocks to perform relatively better than mid caps, as the former commands pricing power, better operational efficiency and access to funds at relatively better rates,” said an ICICI Direct research report.
Crisil research also expects profitability to be under pressure in the quarter gone by, due to rising raw material costs and increased competition.
“Operating profit margin is expected to decline to around 22-23% in Q4 FY11, from 26.1% in the same period last year,” said a Crisil research report.
While sectors like engineering and capital goods, automobiles and consumer durables are expected to stand tall in performance, companies in the telecom, pharmaceuticals, metals and mining and auto ancillaries are expected to feel the heat and witness de-growth in PAT.
“We expect a strong core operating performance from the banking sector driven by high credit growth and robust margins,” said Religare Securities.