By Suhani Adilabadkar
The fourth quarter results are happening this time alongside the Indian Premier League, inviting some inevitable comparisons. The cricket maverick Indian has no other option, but to remain optimistic that his chosen industry or company wins the Indian Stock Market League exhibiting resilience and fundamental stability in the coming days.
Other Industrial Goods Sector - performing like KINGS XI
The Other Industrial Goods category tops the results in terms of performance right now, reporting a Net Profit increase of about 800% for the fourth quarter.
HEG contributed the biggest chunk, posting a quarterly profit of Rs. 6340 Mn compared to a loss of Rs. 38 Mn same period in the previous year, driven by rising demand of electrodes over the past one year. The company’s stock price has multiplied 10 times over the previous year.
Next in line, Apcotex, a leading producer of Synthetic Rubber and Synthetic Latex & SKF India posted Net Profit jump of about 242% & 24% respectively QOQ. The industrial goods industry is being driven by consumer goods demand, signifying higher economic activity which is expected to pick up further pace in the coming quarters.
Realty Rebound: Is this like the Super Kings?
The Realty sector is the next biggest fourth quarter performer after a turbulent 2016-17, and has reported a six fold profitability growth overall in March quarter. Hit by demonetization, RERA & GST in the previous quarter, the realty sector seems to be consolidating now as evident from the fourth quarter results.
Major players, Indiabulls Real Estate, Oberoi Realty and Godrej Properties are out with their results, with Indiabulls Real Estate leading the pack reporting 27 times jump in Net Profit and 5 times in Revenue.
Godrej Properties posted Net Profit higher by 170% and Revenue by 21% YOY in the March quarter FY18. Oberoi Realty has been the most consistent over the past four quarters reporting 41% YOY PAT growth in the current quarter.
Other important players, Prestige Estates & Sobha Developers yet to declare their results. Transparency endowed by GST & RERA has enhanced the prominence of real estate industry both as an asset class and also for long term equity investment.
Breweries and Distilleries - the SUNRISERS
The Breweries industry is currently the best in the pack, reporting a stellar fourth quarter performance with all companies reporting positive numbers and profitability rising almost four fold.
Radico Khaitan, GM Breweries and Som Distilleries reported double digit revenue growth and PAT rising by a phenomenal 105%, 139% & 167% respectively YOY in the current March quarter. Radico maintained stable and consistent growth momentum throughout 2017-18, reporting a 54% yearly net profit jump as on March 2018. GM Breweries reported even better numbers with average quarterly growth of 10% and 66% annual growth in PAT in FY17-18.
Som Distilleries has witnessed both its net profit and stock price doubling over the past one year (!) indicating strong growth for the industry. The breweries industry has recovered from the Supreme Court ban and seems to be in a sweet spot as price of its major raw material molasses has declined over the past 6-8 months.
Iron and Steel- the KNIGHT RIDERS
India is the second largest crude steel producer after China in 2018 with 4% YOY rise. The Iron and Steel sector was expected to report strong numbers driven by the global recovery in US, Europe, China & Japan and strong auto sector, the infrastructure thrust by government and the recovery in capital goods on the domestic front.
Godawari Power & Ispat posted the highest Net Profit performance in the March quarter, rising 8 times YOY and rebounding on an annual basis reporting standalone profit of Rs. 1820 Mn as on March 2018 (against a loss Rs. 774 Mn in the same period previous year).
Next in line was Prakash Industries, another star performer, which posted a Net Profit growth of more than 3 times and Revenue rising by 45% YOY. Tata Sponge & Vedanta’s PAT grew 120% & 90% respectively in March quarter. As steel Industry is cyclical in nature, favourable global steel prices and declining raw material costs are leading to higher margins and attractive valuations for steel companies.
Electrical Utilities- the DAREDEVILS
The electrical utilities industry is expected to grow as India is the third largest consumer of electricity in the world. The sector has grown nearly 100% on the profit front as major players including Tata Power, Reliance Power and BF Utilities posted positive numbers both QOQ and on yearly basis. Tata Power and BF Utilities topped the chart reporting a good performance compared to losses in the same period last year. Reliance Power posted 16% higher PAT with stagnant revenue. Reliance Infra propped up by other income helped in posting strong numbers for the sector as a whole.
The Indian power sector driven by increasing population, higher per capita consumption due to almost 100% electrification of villages by the end of 2018 and rebounding industrial activity will provide an impetus for the growth of the electrical utilities industry.
The OUTLIERS
Identifying an outlier is one of the best strategies in both cricket and stocks. Delta Corp is one such stock, with its PAT multiplying four times and Income rising almost 60% in March quarter FY18.
Another stock to reckon with, Jubilant Foodworks’ PAT surged almost 10 times YOY with highest SSS (same store sales) growth in six years. FMCG companyDabur beat street estimates as well, with quarterly profit growth of 19% and operating margin expansion of 200 basis points.
Dabur is one of the most consistent players in personal products category over the past 4-5 quarters. This list can go on with Thirumalai Chemicals, NELCO, Tin Plate, Philips Carbon, Bharat Seats, Astec Lifesciences & HIL as results season is just one month down. What investors need to do is to identify an IYER or PANDYA or GAYLE to put their bets on in this unpredictable time.
Suhani Adilabadkar is a Research Analyst registered with SEBI ((INH200003240)) She has done PGDBA (Finance), MS (Finance) and a Fellowship from Insurance Institute of India. She maintains a blog at oasisfundamentals.blogspot.in.
Disclaimer: Investing in stock markets is subject to market risks. Neither Trendlyne nor the author is liable for losses including consequential losses, claims, or expenses incurred by third parties from following research reports and advisory analysis available on Trendlyne.
Photo by Aavtar Singh
