Covid-19 cloud over Q4 results
This earnings season which kicks off from Wednesday will give an indication of the impact of Covid-19 on industry. Analysts are keen to see whether companies give a guidance in the wake of the virus-induced lockdown that has brought the economy to a standstill.
The results season will commence on April 15 with Wipro declaring its numbers. This will be followed by Tata Consultancy Services (TCS) on Thursday and HDFC Bank on April 18 and Infosys early next week.
Observers are already expecting Corporate India to report a muted performance for the January-March 2020 quarter as the domestic economy was already passing through a slowdown.
However, this time the attention will be on their outlook for the first quarter of the current fiscal and the likely road map for normalisation of businesses as restrictions imposed in the wake of the pandemic are likely to be done away in phases through the country. Experts are also not ruling out the possibility of companies not giving out a specific guidance because of the uncertain environment at present.
Last week, Cognizant had withdrawn its 2020 revenue guidance and had lowered the first quarter revenue outlook. However, among domestic companies, the impact of the coronavirus is unlikely to be significant during the fourth quarter as the lockdown was imposed only after the second week of March.
“We estimate the fourth quarter revenue of the top five Indian IT players—Infosys, Tech Mahindra, HCL Techologies, TCS and Wipro—to decline around 1.3-0 per cent quarter on quarter in constant currency terms as the global economy comes to a grinding halt,’’ analysts at Edelweiss Securities said in a recent note. The brokerage expects TCS to report a net profit of Rs 8,095 crore compared with Rs 8,126 crore a year ago
Analysts at Emkay Research feel that the impact of the pandemic will be seen from the January-March quarter itself for IT services companies.
“We expect early weakness on both demand and delivery for Indian tech to start reflecting in the March 2020 quarter itself.” Among the IT services companies, Infosys, Wipro and HCL Technologies give a guidance.
We expect a -0.5-0.3 per cent QoQ dollar-revenue growth for Tier I techs,’’ they said. should be fine with companies desisting from providing an outlook for now, given significant uncertainty and lack of visibility.
Among the IT services companies, Infosys, Wipro and HCL Technologies give guidance.
While sectors like automobiles, airlines, hotels, metals, organised retail and certain export oriented industries are expected to the worst affected from the current crisis, it is also be felt albeit in a lesser scale on others like banks and consumer goods where the impact will be mixed.
The telecom sector on the other hand is expected to gain from more data consumption as the lockdown has forced people to work from home.
Marico, has been one of the companies that has given a update for the January-March period, ahead of its numbers. The FMCG player has said that the India business posted a low single-digit volume decline during the quarter, with very skewed high growth in the Saffola portfolio (as people stocked up essential items during the lockdown).
It however, added that revenue decline both in India and international business, coupled with an unfavourable mix in the India business, will translate into a modest decline in EBITDA in the quarter against the corresponding quarter last year.
```In terms of consumer off-take, core Food &Beverages and home/personal hygiene categories would have benefitted from panic buying and stock piling by consumers. On the other hand, bulk of personal care categories, discretionary products even within F&B and categories with high on-the-go consumption would have been impacted negatively’’, a note from Kotak Institutional Equities said.
For the banking sector, brokerages are not forecasting any improvement in their asset quality during the fourth quarter. However, overall loan growth is expected to take a major hit in current quarter, with its impact largely seen in the SME and retail segments.