Tag: Q1 earnings preview

The most important number to watch out for in TCS earnings

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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[wealthdesk shortname=”TCS” isinid=”INE467B01029″ bseid=”532540″ nseid=”TCS” sector=”Computers – Software” exchange=”nse”]

Tata Consultancy Services (TCS) is all set to kick off the corporate earnings season, with India’s largest software exporter due to report its financial results for the April-June period on July 8. Analysts and investors will look out for the IT giant’s margin — at a time when elevated employee costs continue to impact profitability in IT thanks to high attrition, even as there is healthy demand for technology across sectors.

Dalal Street participants will also keenly track the company’s management commentary and revenue guidance.

Analysts in a CNBC-TV18 poll estimate TCS’ margin for the April-June period at 23.7 percent — which means a sequential fall of 126 basis points.

This as they expect the company’s revenue growth to come in at 1.7 percent in dollar terms. In constant currency terms, analysts estimate growth to come in at about 3.5-4 percent.

One can expect a margin contraction of at least 150 basis points for TCS in the forthcoming earnings, Sandip Agarwal, Research Analyst-Institutional Equities at Edelweiss Securities, told CNBC-TV18. “If it is 130 bps, I will be very happy because it will mean that they have been able to absorb a lot of margin pressure through operational efficiency and maybe pricing gains,” he said.

A low attrition number will be a positive surprise, Agarwal added.

Businesses across sectors are spending heavily on technology, boosting the profitability of IT companies, but elevated costs — towards talent acquisition and retention — and cross-currency headwinds are hurting them.  The dollar index — which gauges the greenback against six peers — is not far from a 20-year peak hit this week.

The US accounts for 55 percent of Tata Consultancy Services’ revenue, the rest of which comes from the markets such as Europe, Australia and Japan.

So, when TCS converts revenue earned in currencies such as the euro or the pound back into the dollar, it is likely to lose in terms of a growth rate.

That is why the constant currency revenue growth is going to be higher at 3.5-4 percent.

Also Read: TCS to kick off earnings season on July 8 — Here’s what one can expect from IT companies

Usually, the IT company raises wages effective April 1 — it is expected to weigh on its margin and profit. 

The TCS management said earlier that despite a worsening macroeconomic situation, tech budgets are not impacted and demand continues to be resilient. It also said that even though clients are facing a cost squeeze, they are now focusing more on digital projects, which will help in prioritising the tech budgets and cost savings.

At a time when the economy is slowing and companies are facing cost pressure, there is a possibility that deal wins and deal signing will slow down. That number will be very crucial and hiring attrition is also on top of investors’ minds.

The TCS stock along with the rest of the IT pack has seen a price-to-earnings derating. TCS shares have retreated about 20 percent from their recent peak, with peak valuation multiples down to about 25 times on a year-to-date basis from 30-32 times-odd levels.

Watch the accompanying video of CNBC-TV18’s Reema Tendulkar for more details.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Britannia Industries Q1FY22 earnings preview: Street expects 7.5% decline in revenues

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Britannia Industries will report its Q1FY22 results today and this time around biscuits are likely to lose their crunch and that is because of a high base.

CNBC-TV18 poll expects it to be a weak quarter because in the same period last year the company had 22 percent volume growth. It was the first time there was a lockdown and also people had actually stocked up their pantries. On that unfavourable base counter-intuitively, Britannia will report a weak set.

Margins are expected to contract on a higher cost of raw material and impact of packaging as well.

So, all of that put together a 7.50 percent decline in revenues, 22 percent dip in EBITDA, and 24 percent dip in the profit is what the street is working with this time around.

Domestic volumes likely to contract by nearly 8 to 10 percent. This comes on an unfavourable base of 22 percent growth at the same period last year.

Price/mix lead growth will be anywhere between 2 to 3 percent because of higher raw material prices, higher packaging, and inflation in palm oil prices. The company had increased their cost by nearly 2 to 3 percent odd.

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TVS Motor Q1 earnings preview: Street expects margins at 7.50%

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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TVS Motor Company will report its Q1 earnings on July 29. The street expects a good set of numbers on a year-on-year basis because of the low base of last year.

So optically the numbers will look good, but there is definitely pressure quarter-on-quarter. The revenues are expected to decline by 26 percent quarter-on-quarter because of a fall in volumes.

On account of the second COVID wave, demand was under quite a bit of pressure. Volumes were down 29 percent quarter-on-quarter at 6.5 lakh units, because of the COVID restrictions in the domestic markets, although exports did well this time around.

Now the margins are also expected to decline about 260 basis points quarter-on-quarter to 7.50 percent because of higher raw material costs and weak operating leverage.

Remember, in Q4 the management came out with 10 percent plus margins, which was a multi-quarter high. But this time around a lag effect of higher raw material prices has hit the margins and that is why margins could fall to about 7.50 percent.

The stock has largely been range bound in the last 3-6 months on account of both pricing as well as demand pressure.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Colgate Q1FY22 earnings preview: Street expects 15% revenue growth

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Colgate will report its Q1 results on July 29. CNBC-TV18 poll expects Colgate to report good earnings.

In the same period last year was a low base and also the previous quarter the company reported good numbers and the street expects that momentum to continue.

The company also did go ahead and take some price hikes so that will aid their numbers. The stock is reflecting near its all-time high trading at around 41 times FY23 earnings.

CNBC-TV18 poll expects 15 percent growth on revenues at nearly Rs 1,200 crore out there. Expect EBITDA to grow a tad higher at 18.50 percent, which means there is a margin expansion of almost one percentage point and the net profit also grows nearly 22.50 percent.

The company cease to give volume or market share data. But any indicator of qualitative commentary coming on that would be extremely important.

The street, however, is working with a volume growth of anywhere between 9 percent and 11 percent along with realisation growth of 4 to 5 percent.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Jubilant FoodWorks Q1 earnings preview: Expect strong recovery on weak base, revenue to grow by 128%

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Jubilant FoodWorks will report its earnings for the first quarter ended June 30 on July 21. The company is expected to report a strong quarter on a weak base.

According to a CNBC-TV18 poll, revenue growth of 128 percent is expected on a very weak quarter which comes at Rs 885 crore. The earnings before interest, taxes, depreciation and amortization (EBITDA) is likely to be at Rs 190 crore while the net profit is seen at Rs 55 crore.

In May and April, Jubilant FoodWorks saw a delivery growth of 37 and 55 percent, so the overall business recovered to 95 percent and 88 percent respectively, including the loss in dine-in.

The Street is bracing for a 125-130 percent store sales growth, but again on a very low base. If the company opens 15-20 Domino’s stores, it will be good for traction.

Commentary on-demand and outlook for recent pivots are key things to watch out for.

Watch the accompanying video for more.

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3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Pharma sector Q1FY22 preview: Strong growth seen in India biz; US sales likely to remain flat

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Pharmaceutical and healthcare businesses are expected to report high growth in the June quarter, owing to a low base in India and robust recovery in acute categories such as COVID-19-related therapies.

In value terms, the Indian pharma industry grew 37.2 percent in Q1FY22, aided partly by the COVID-19 portfolio. Meanwhile, these businesses may see stable US revenues on a sequential basis with improvement in volumes of injectables and new launches offset by price erosion.

Domestic volumes for the Indian pharma companies during the quarter grew 23 percent, while prices and new introductions grew 6.5 percent and 7.7 percent, respectively.

Domestic brokerage firm ICICI Securities expects pharma companies’ India business to grow in high double-digit. It forecasts the EBITDA margin at 22.5 percent (+70 bps YoY) led by revenue growth and cost control measures.

Hospitals would continue to report recovery in occupancy levels while Diagnostics will report a healthy YoY rise on a low base.

“Overall, we expect our coverage universe to report 16.6% revenue and 20.2% EBITDA growth,” ICICI Securities said in a report.

Meanwhile, US sales of pharma companies are expected to remain flat QoQ in Q1FY22.

“We expect Alkem, Cadila, Dr Reddy’s, and Aurobindo to show QoQ growth in US sales led by injectables and new launches. Other companies would post flattish to marginal decline in a stable environment due to lack of new launches,” the brokerage said.

It expects relatively better results from Cipla as key products in the US grow and benefit from COVID-19 drugs in India; Alkem Laboratories with a strong recovery in the acute portfolio; Glenmark Pharmaceuticals with strong favipiravir sales and Divi’s Laboratories led by strong demand for APIs from India.

Diagnostic companies would report strong growth on a low base and a high number of COVID-19 tests, it added.

Going ahead, key factors to watch out for during management commentary would be growth outlook in India for the industry and respective companies, update on restart of USFDA inspections and price scenario in base US business, and traction in specialty products.

Further, the pharma companies’ outlook on demand and growth in emerging markets with and sustainability of the recovery in diagnostics and hospitals, would also be in focus, as per the brokerage.

Among key risks, ICICI Securities mentions adverse outcomes of USFDA inspections, currency volatility, and the inclusion of more products under NLEM in India.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Auto Sector Q1FY22 Preview: Price hikes to offset low volumes impact on topline, high costs to weigh on margins

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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After seeing healthy demand during the first quarter of fiscal 2022, the auto industry suffered a slump as authorities clamped local lockdowns to tackle the deadly second wave of coronavirus cases in May.

Given the April-June quarter of 2020 was severely impacted by the COVID-19 pandemic and the nationwide lockdown, the volume trends are to be examined on a sequential basis.

The Nifty Auto index has performed in line with the broader market during the April-June 2021 quarter, up 7 percent QoQ, due to commodity cost inflation and moderating growth trends across two-wheelers.

The sector returns have been normalising over the past six months due to inflationary cost pressures and elevated valuations.

While the total industry sales volumes have declined around 33 percent in Q1FY22 as compared to the previous quarter, the topline performance is expected to be slightly better on the back of broad-based price hikes. However, industry margins are seen impacting due to sustained rise in commodity cost inflation.

According to ICICI Direct among two-wheelers, Bajaj Auto performed the best, with volume decline limited to 14.2 percent (8.99 lakh units) courtesy solid exports delivery. Hero MotoCorp reported a 34.7 percent decline to 10.24 lakh units while Royal Enfield volumes at Eicher Motors fell 39.6 percent to 1.24 lakh units.

Passenger vehicle (PV) market leader Maruti Suzuki recorded 28 percent degrowth to 3.5 lakh units while Tata Motors’ standalone volumes fell 40.1 percent to 1.14 lakh units (JLR volumes expected at 88,324 units, down 35.3 percent).

M&M’s total volumes (automotive, tractors) were down 7.6 percent to 1.87 lakh units while pure play CV maker Ashok Leyland posted 59.2 percent de-growth to 17,987 units. Escorts’ tractor sales de-grew 20.4% to 25,935 units.

Ex-Tata Motors, OEM coverage universe is seen posting a 25.8 percent QoQ decline in net sales accompanied by around 250 bps sequential drop in margins to 9.5 percent, as per the brokerage.

Meanwhile, the commodity prices have remained firm, with OEMs raising prices to partially offset the above. Further, the sudden outburst of the COVID wave in Apr-May 2021 had resulted in temporary production shutdowns, which will impact profitability this quarter.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow