TCS To Asian Paints: Firms Likely To Post Best And Worst Revenue, EPS Growth In Q3

India Inc. faced a tough third quarter as input prices continued to escalate, and a surge in bond yield raised borrowing costs.

The Bloomberg consensus earnings estimates available for 206 of the BSE500 companies indicate a sequential decline of 5.6% in aggregate net profit at Rs 1.5 lakh crore in the quarter ended December. That's also because energy and communication companies reported exceptional profits in the preceding three months on one-time gains, other income, and deferred tax benefits.

The cumulative revenue of BSE500 companies is expected to fall 1.2% sequentially to Rs 17.82 lakh crore in October-December.

Corporate earnings and revenue rose 23.3% and 11.5% sequentially in the second quarter. Cost cuts, tax benefits, lower interest rates and improving consumer confidence and spending aided.

But rising commodity prices will continue to weigh on India Inc.'s margins. The Bloomberg Commodity Index that covers prices of oil, natural gas, copper and zinc, among others, averaged 100.97 in Q3 compared with 95.65 in Q2 FY22.

Sector-Wise Snapshot

• Information Technology: Performance will be driven by high discretionary spending and digital transformation.

• Private Banks: Will benefit from a steady recovery in loan growth, driven by retail, SME, and business banking.

• Capital Goods: Will benefit from a pickup in ordering activity, recovery in metals and cement, and capital spending by the government.

• Cement: Will benefit from a pickup in demand. Motilal Oswal expects a 2% rise in average third-quarter cement prices.

• FMCG: Will be upbeat due to the festive and wedding season, but commodity inflation will continue to put pressure on the margins.

• Healthcare: Muted outlook in the U.S. and cost pressures to weigh.

• Auto: Will be under pressure due to chip shortage that has impacted global as well as domestic production volumes, as well as weak domestic two-wheeler demand.

Tata Consultancy Services Ltd., Infosys Ltd. and Wipro Ltd. will kick-start the third-quarter results season on Jan. 12

Analysts have downgraded adjusted earnings per share estimates for 99 of the 166 constituents in the BSE500 index—for which forecasts were available on Bloomberg—in the third quarter. 67 saw an upgrade.

BloombergQuint compiled a list of BSE500 companies that are likely to report the highest and worst sequential growth in sales and adjusted EPS in Q3 FY22.

Selection Criteria

• BSE500 companies.

• Tracked by at least four analysts.

• 10 companies with best and worst sequential growth in revenue.

• 10 companies with best and worst sequential growth in adjusted EPS.

Revenue Tracker—The Best And Worst

EPS Growth—The Best And Worst

Here's what analysts forecast for the companies likely to post the best and worst revenue and EPS growth in the third quarter.

(The sector-wise reasons have been compiled from the research reports of Prabhudas Lilladher, Motilal Oswal and Kotak Securities.)