As 2024 ends, the benchmark indices, Sensex and Nifty 50, are set to finish the year with single-digit gains. The Sensex has gained 8.2% over the year, while the Nifty has risen 8.8%.
The year saw major milestones: the Sensex hit a record high of 85,978.3 and the Nifty reached a record of 26,277.4 on September 27. However, the year's final quarter has seen a downturn for the indices with the Nifty 50 declining by 8.7% and the Sensex falling by 9.7%.
ICICI Direct said, “In the journey of Nifty to 50,000 by CY30, the index has achieved the milestone of 24,800 for CY24. Our analysis indicates that the stage is set for the next up move towards 28,800 levels in CY25.”
But a continued rise for the Indian indices depends on whether company earnings can justify current and future valuations. The September quarter was disappointing for many sectors. Now as the next earnings season approaches, we look at turnaround companies that analysts say are poised for a financial recovery in Q3FY25. These companies underperformed in revenue or net profit in Q2FY25, but are expected to show a stronger performance in Q3FY25.
In this chart of the week edition, we highlight these comeback kids, the companies which delivered disappointing results in Q2FY25 but are forecast to rebound in the upcoming quarter.
Bharat Dynamics and Prestige Estates lead the turnaround charge
Bharat Dynamics, a leading defense company, is expected to see a 102.8% YoY revenue growth in Q3FY25, rebounding from an 11.5% and 16.7% YoY decline in revenue and net profit, respectively in Q2FY25. The ongoing Russia-Ukraine war and Middle East conflicts caused supply chain delays, affecting Q2 performance.
The company’s 68.3% EPS growth forecast signals a strong recovery in profitability. As the sole manufacturer of missiles and torpedoes for the Indian military, Bharat Dynamics benefits from both domestic and export opportunities. While recent order delays have affected performance, Elara Securities remains optimistic about a surge in orders driven by upcoming defense capital expenditures.
Despite a challenging Q2FY25, Prestige Estates is expected to perform strongly in Q3FY25, with a forecast of 56.6% YoY revenue growth and a 165.2% YoY EPS increase. This turnaround is driven by the expected recovery in demand across the residential and commercial real estate segments. The company is also accelerating new launches in key markets such as Mumbai, Chennai, Bengaluru, Hyderabad, and NCR, following delays due to RERA (Real Estate Regulatory Authority) approval processes. Many of these projects, originally planned for earlier, are now slated for Q3FY25. Prestige Estates has also outlined plans to launch projects with a total Gross Development Value (GDV) of Rs 520 billion in H2FY25.
General industrials and consumer durable sectors expected to recover
The turnaround screener has the maximum number of companies (8 out of 42) from the general industrials sector. Several companies from the sector are expected to make significant turnarounds in Q3FY25. Companies like CG Power & Industrial, Grindwell Norton, and Timken stand out with positive forecasts.
CG Power & Industrial is expected to see a 40.2% rise in net profit in Q3FY25, despite an 8.8% decline in Q2FY25. The decline was due to higher material costs and other expenses. The company, which specializes in electrical equipment, automation, and industrial solutions, has a strong order book of Rs 7,831 crore. In November, it won a Rs 500-600 crore order for the Kavach train protection system from Chittaranjan Locomotive Works, with execution expected within a year.
Grindwell Norton, which saw a modest 4% YoY revenue growth and a 4.7% decline in net profit in Q2FY25, is projected to post a 15.8% YoY revenue growth and 18.7% YoY EPS growth in Q3FY25. The company's performance in Q2 was impacted by margin declines in the ceramics & plastics and digital services segments, along with lower-than-expected growth in the abrasives segment. In H1FY25, the abrasives segment grew 5.5% YoY to Rs 350 crore, accounting for nearly 50% of total revenue of Rs 710 crore. Moving forward, growth in the abrasives segment is set to be driven by opportunities in solar glass edge grinding, increased demand for high-productivity solutions in steel and construction, and the expansion of non-woven products into new market segments.
Similarly, companies from the consumer durables sector are expected to deliver positive results in the upcoming quarter. Finolex Cables is expected to recover in Q3FY25 with 11.6% YoY revenue growth and 7.8% EPS growth. In Q2FY25, net profit declined by 23.5% due to volatility in input prices, inventory loss, and destocking. However, stable input costs, improving margins and higher volumes are expected to drive growth in the upcoming quarter. Strong demand from the real estate sector and increased government spending are expected to boost wire and power cable volumes.
Kajaria Ceramics, India’s largest ceramic and vitrified tile manufacturer, expects a positive Q3FY25 with 10.5% revenue growth and 12.2% EPS growth after weak Q2FY25 results. Strong domestic demand, driven by the realty sector and growing exports, is expected to support its recovery.
Honeywell Automation faced challenges in Q2FY25, with a 5.6% decline in net profit due to weak execution, softer demand, and accounting changes. However, Q3FY25 looks promising, with EPS forecast to grow by 26.2%. The company should benefit from the government's focus on infrastructure sectors like oil, gas, power, and metals. Its emphasis on industrial digitalization, automation, and sustainability is expected to drive long-term growth, aiming to outpace GDP domestically.
Strong rebound in consumer-facing companies
Jubilant Foodworks is expected to achieve 50.3% revenue growth and 48% EPS growth in Q3FY25, recovering from a 34.1% YoY net profit decline in Q2FY25 due to higher tech investments and supply chain upgrades. The company also holds the master franchise for Domino’s India. Domino's added 50 stores and entered 20 new cities in Q2, with expansion efforts set to further boost customer reach and market share.
Westlife Foodworld reported a 98.4% drop in Q2 net profit, driven by higher expenses, subdued in-store business and rising inflation, which affected consumption outside the home and intensified competition. However, the company, analysts predict, will achieve 30.9% EPS growth in Q3FY25. Despite near-term challenges like lower on-premise sales, the company is expected to perform well in Q3 due to the festive season and new menu offerings. Management expects gross margins to rebound to over 70% in H2FY25, targeting 18-20% EBITDA margins by 2027.
Dabur reported a 5.5% revenue decline and a 17.5% net profit drop in Q2FY25, impacted by inventory corrections. Commenting on Q2 results, the company's CEO, Mohit Malhotra, stated, “The inventory correction is an exceptional one-time event. Dabur's business fundamentals remain strong, with our 5-year revenue CAGR for the India business growing at over 8%.” The forecast for Q3FY25 indicates a recovery with 5.7% revenue growth and 0.9% EPS growth. The acquisition of Sesa Care in October is expected to strengthen Dabur's position in the premium Ayurvedic hair oil segment.
