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Street Expectations: Infosys, TCS, LIC Housing Finance and Reliance Industries

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Financial results for the quarter ending June 2016 have been flowing in and we have tabulated some of the earnings estimates you in this post.
Results Due 15 July 2016

The current reported list stand at 5/620 companies. You can find them in our Daily Earnings Tracker.

There are 4 large cap stocks to watch for over the next 2 days. Below are the street expectations of these companies.

Other stocks to keep an eye out for include Can Fin Homes, NIIT and Cyient. You can check them out on our SNAP analytical tool.

Infosys

Brokerage firm Reliance Securities said that company’s margins could be dented in the first quarter mainly due to wage hikes and which visa costs which put pressure on EBIT margin.

Infosys has already warned that its margins could be dented by 200 basis points on account of rising visa and salary costs. But its confident of meeting the FY 2017 revenue growth guidance of 11.5-13.5%.

Wage hikes, visa costs to pressurize EBIT margin, EPS; key factors to watch – automation impact on replacing people, deal wins, retail vertical growth, margin band maintenance, Brexit commentary are some of the things to watch our for along with the results.

Motilal Oswal estimates the company’s June 2016 revenues at Rs. 17,019 crore, an increase of 18.6% over Rs. 14,354 crore. Net profit is expected to rise 18.7% to Rs. 3,595.50 crore.

Reliance Securities estimates revenues to come at $2.52 billion, marking an increase of 11.6% on YoY basis and 2.9 % on sequential basis.

We think that estimates are likely biased lower from core revenue trends likely have worsened since last guidance. Earnings Per Share estimate is $0.23 as reasonable/mildly high Baird said.

Key factors to look out for:

  • Total contract value (TCV) of deal wins during the quarter.
  • Commentary around contribution of newly launched services and macro, verticals, margins and pricing.
  • Management’s assessment of Brexit and its impact on the company.

TCS

As per the latest ET Now poll, TCS is likely to report a 4.1% QoQ growth in dollar-denominated revenue at $4.06 billion for the quarter ended June, 2016.

Net profit before bonus pay-out for the IT major is likely to fall by 7.75% to Rs. 5,448 crores compared to Rs. 5,906 crore in the previous quarter.

The banking, financial services, and insurance (BFSI) and retail verticals which contribute over 54% to the total revenue are expected to report better traction while energy, telecom and insurance verticals are likely to stay muted.

Earnings before Interest & Tax (EBIT) is likely to slip marginally to Rs. 6,571 crore compared to Rs. 6,591 crore in the previous quarter.

EBIT margin (before bonus) is likely to contract to 25.5% compared to 27.2% in the previous quarter. Analysts now expect TCS to post 3.4% sequential dollar growth in the April-June period.

As per Microsec Capital report, TCS dollar top line is expected to increase 2.6% sequentially to $4 billion.

Things to watch out for:

  1. Marginal cross-currency headwinds likely
  2. EBIT margins to decline by 170 bps due to wage hike, visa costs
  3. Wage hike to be partially offset by 2.1% Rupee depreciation
  4. Due to lower margin & forex gain, net profit to be lower

Nomura remains cautious of the company achieving double-digit growth in FY17.

Reliance Industries

Reliance Industries has a bag of positives and negative for the quarter. The company has signed an agreement with SBI to start payment bank in addition to Rs 800 crore contract for exploration in Tamil Nadu and also has scheduled to restart its offshore gas projects by the end of 2017.

The much hyped Reliance Jio is about to be launched in September. Reliance Jio has targeted 100 million users before the commercial launch of Reliance Jio.

As per Nomura, outlook remains good for RIL on a short term basis with strong refining margins. Upcoming expansion will be the key driver, with downside risk of prolonged oil price weakness.

Financial Times estimates the Q4 earnings at Rs 19.93/share and have pegged the revenue estimate at Rs 677.05 billion.

LIC Housing Finance

LIC Housing Finance’s New product Loan Against Property (LAP) might give boost to its earnings growth as per IDBI Capital. The downside risk being LIC Housing Finance concentrated only towards traditional housing finance and aggressive pricing competition from other banks.

While MOSL, has stated low cost of funds and its stable and strong asset quality are the key positives for the company.

Things to watch out for:

  1. Asset quality to be strong. NPA has averaged 54 bps FY09-FY16.
  2. Leverage to stay around 14x for FY17 – IDBI capital.
  3. Net profit CAGR to remain around 14%.
  4. Increase in LAP loans by 8.7% in FY2016 and might increase further for this quarter.

We will continue to track the street expectations for most of the large cap companies and also keep a tab on the near term results.

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Disclaimer

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r above; if you do, it is entirely at your own risk without any liability to Capital Mind. This is educational or informational matter only, and is provided as an opinion.

Disclosure: The authors at Capital Mind have positions in the market and some of them may support or contradict the material given above, or may involve a direction derived from independent analysis.