The Q3FY25 results season has been under par, with approximately 44% of companies that released their results seeing negative profit growth. In this edition of the chart of the week, we screen for stocks with the highest negative surprises in revenue and net profit during the quarter, according to Forecaster.
The negative surprises screener is dominated by stocks from the auto, finance, pharma & biotech, consumer durables, and general industrials sectors. Major stocks in the screener include India Cements, Adani Enterprises, Biocon, BEML, Alembic Pharma, Bosch, CCL Products India, Angel One, Astral, and Bajaj Auto among others.
The companies in the screener disappointed investors for various reasons. Net profit misses were due to higher costs in raw materials and operations. Revenue underperformed estimates owing to increased competition, pricing pressure and weak demand in the domestic market.
The auto sector struggled with low demand from the domestic market, leading to missed estimates, while the pharma & biotech stocks saw strong pricing pressure and increased competition.
India Cements & Adani Enterprises underperform estimates due to higher input costs
India Cements has seen the highest Forecaster estimated net profit miss of 198.8% in Q3FY25, while its revenue missed estimates by 4.5%. This comes after the cement & cement products company’s net loss expanded by a steep 26x YoY and revenue declined by 16.8% YoY during the quarter. Rising expenses in raw materials, inventory, employee benefits, finance, power & fuel, and transportation resulted in expanding net loss. Its revenue has also fallen YoY for the past seven consecutive quarters. According to analysts at Motilal Oswal Financial Services, India Cements’ revenue was also hit by lower price realisations in the blended cements segment.
Adani Enterprises also features in the screener after its net profit and revenue missed Forecaster estimates by 96.6% and 14.4%, respectively, in Q3FY25. This was a result of the commodity trading & distribution company’s net profit and revenue plunging by 96.9% YoY and 18.5% YoY. Increasing costs were also a factor here – in raw materials, inventory, employee benefits, finance, depreciation & amortisation, and foreign exchange, which drove the decline in net profit. Meanwhile, its revenue decreased owing to a reduction in the integrated resources management (IRM), commercial mining, and road segments.
Speaking on the company’s results, its Director and natural resources CEO, Vinay Prakash said, “The IRM business declined due to a good domestic coal availability for customers, resulting in lower sales. We have been exploring ways to tap into newer market segments through initiatives like the IRM portal, an e-portal for the online trading of natural resources.”
Biocon & Alembic Pharma miss estimates on the back of increasing pricing pressure
Biocon’s Q3FY25 net profit and revenue missed Forecaster estimates by 80.5% and 2.4%, respectively, after falling 96.2% YoY and 14.7% YoY. The biotech company’s net profit declined due to rising costs in inventory, employee benefits, etc. A reduction in sales from the generics and biosimilars businesses resulted in a degrowth in revenue. The biosimilar business revenue fell due to the company selling its branded generic immunotherapy and nephrology businesses in FY24.
However, analysts are positive about the company. Axis Direct believes that Biocon has a strong product line over the next three years, including five new products, like Aspart, Bevacizumab, Denosumab, and Stelara, which are expected to drive growth. It expects the company’s revenue and net profit to grow at a CAGR of 11.7% and 10.2%, respectively, over FY25-26.
Alembic Pharmaceuticals witnessed its Q3FY25 net profit and revenue missing its Forecaster estimates by 20.5% and 2.5%, respectively. This comes after the pharmaceutical company’s net profit declined due to higher costs in raw materials and employee benefits. Meanwhile, revenue missed estimates due to a reduction in the active pharmaceutical ingredient (API) business.
Analysts at KR Choksey believe the company struggled with headwinds in the acute therapy business, which saw seasonal weakness. The API business has also struggled due to pricing headwinds, lower demand from key customers, and heavy competition from low-cost manufacturers.
Auto stocks underperform estimates, led by weak demand
BEML’s Q3FY25 net profit and revenue missed Forecaster estimates by 72.5% and 23.6%, respectively, after decreasing 49.4% YoY and 18.6% YoY. The commercial vehicles company’s net profit fell due to increasing inventory and finance costs. On the other hand, weak demand for commercial vehicles due to muted construction activity led to a decline in revenue.
Bajaj Auto is another notable auto stock to feature in the screener, with its net profit and revenue missing Forecaster estimates by 3.1% and 1.4%, respectively in Q3FY25. Higher sales of lower-margin electric vehicles led to this ?-wheeler manufacturer’s net profit missing estimates. Meanwhile, lower demand in the domestic market resulted in revenue underperforming estimates.
Post results, Rakesh Sharma, Executive Director of Bajaj Auto, stated, “Going forward, we expect the domestic two-wheeler segment growth to be around 6-8%. We plan to continue to build share in the 125cc+ segment through steady expansion of Freedom and leveraging the expanded lineup for Pulsars, KTMs, and Triumphs.”
Bosch’s Q3FY25 net profit and revenue underperformed Forecaster estimates by 15.9% and 1.2%, respectively. This comes after the auto equipment company’s net profit declined due to higher costs in raw materials, inventory, and employee benefits. However, revenue missed estimates, driven by declining sales of heavy commercial vehicle components.
Guruprasad Mudlapur, Managing Director and CTO of Bosch highlighted, “The growth is driven by mobility aftermarket, two-wheeler, power sports and consumer goods businesses. Looking ahead, sustained macro stability, policy support, and consumer liquidity will be critical in maintaining momentum and ensuring broad-based growth across segments.”
