Capital Goods, Banks Power Up Q1 Earnings; OMC Woes Drag Overall Corporate Profit Down, Says Kotak

Capital Goods, Banks Power Up Q1 Earnings; OMC Woes Drag Overall Corporate Profit Down, Says Kotak​

Kotak Institutional Equities has released a detailed forecast for the upcoming quarter, suggesting a highly mixed picture across key sectors. While companies outside of oil marketing are expected to register significant profit growth, the overall corporate profitability is projected to decline amid headwinds faced by Public Sector Undertakings (PSUs).

The brokerage projects that companies under its coverage universe, excluding OMCs, will post a 14.6% year-on-year rise in net profit during the June quarter. Conversely, when considering the entire market, overall profit is expected to fall by 8.7%. This decline is attributed to BPCL, HPCL, and Indian Oil facing likely losses from marketing activities amid crude price volatility.

Financial Forecast for Nifty and BSE Indices​

The institutional view suggests a moderate growth trajectory for major indices. Kotak anticipates that the Nifty-50 earnings will grow by 9.8% year-on-year. Meanwhile, companies tracked in the BSE Sensex are projected to report profit growth of 4.8%.

Private Banks and Capital Goods Lead Corporate Resilience​

The financial services segment is expected to remain robust. Kotak anticipates a steady quarter for major lenders including HDFC Bank, ICICI Bank, and Axis Bank. This stability is underpinned by healthy loan expansion, stable asset quality metrics, and easing pressure on net interest margins. The brokerage maintains a preference for frontline private banks over their peers in the sector.

In the capital goods space, several companies are set for growth. Siemens, CG Power, and BHEL are all expected to deliver substantial revenue gains. L&T is anticipated to report around 6% growth in its core EPC business despite noted disruptions concerning overseas execution in the Middle East. BEL is expected to achieve a solid 16% revenue increase.

Auto Sector Growth Offset by Commodity Pressure​

The automobile industry is set for notable expansion, with manufacturers projected to register approximately 17% revenue growth. However, margin management will be critical for several players. Hyundai Motor India, Tata Motors, and various tyre companies are likely to face pressure on margins due to higher commodity and energy costs. Nevertheless, auto component makers like Uno Minda and Bharat Forge are expected healthy revenue growth despite facing raw material headwinds.

Construction Materials and Consumer Sector Performance Outlook​

The construction materials industry is set to benefit from steady demand across the board. UltraTech Cement, Shree Cement, Dalmia Bharat, and JK Cement are all expected to see positive performance in their operations. Yet, these players must contend with margin pressures caused by rising freight, fuel, and packaging costs.

In consumer-facing markets, companies like Trent, Page Industries, and Aditya Birla Fashion are forecast to report healthy revenue growth. The telecom sector is also anticipated to perform well, supported primarily by increased Average Revenue Per User (ARPU).

Sector-Specific Risks and Headwinds​

While the overall sentiment remains positive for select segments, specific sectoral risks have been flagged by Kotak Institutional Equities. In the shipping domain, Cochin Shipyard could face a decline in its topline due to lower ship repair revenues. This highlights the bifurcated nature of the market recovery anticipated across different sub-sectors.