The earnings season has officially come to an end. CNBC-TV18 research shows that India Inc may well be on the road to recovery. Haresh Soneji joins us now for a review of the Q2FY10 earnings.
This time around earnings from India Inc has been really good. The best thing to happen for India Inc is that volume growth is finally picking up and that is what we have been hearing from all the managements coming on our channel and showcasing it all about.
Once again this quarter we have to look both on year on year (YoY) basis and also quarter on quarter (QoQ) basis which will give a proper gauge of how these numbers are stacking up.
Net sales:
Net sales on YoY basis may be up just 1% but on QoQ basis it is up 7% which clearly shows India Inc’s discounts and other freebies offered is finally picking up. Volume growth is happening which is one good sign for India inc. Other income is up about 10% but if you see on QoQ basis it is moving down gradually, which is also good sign; Fx and other financial attritions are being left aside and focus is purely on the business side.
Inventories:
It has moved down 61% but on QoQ basis inventories are looking up maybe that was preparation for festive season which happened in October, so nothing to worry on that front.
Material Costs:
Material Costs are down 3.5% on YoY basis and but on QoQ basis it is up about 8% which shows inventory pile up which was there on the India Inc for previous few quarters is now been moving down slowly and India Inc is setting up fresh inventories
Interest expense
It is up YoY basis but on QoQ basis its 9%, which shows that focus is on manufacturing and India Inc is going for working capital lows and that is why inventory is showing that.
Profit After Tax (PAT):
PAT is up 11.4% (YoY) for 1952 companies which we analyzed ex-oil, financial and trading companies and on sequential basis up about 7% and adjusted for other income, the PAT also looks decently up 11.5% and on sequential basis up 18%.
Operating Profit Margins (OPM):
OPMs at 22.3% similar to the previous quarter and NPMs at about 11% which is again similar to previous quarter that is where overall numbers are concerned.
Sensex PAT is up about 5.7% and on QoQ basis its up 1% which is not bad either so on that EPS currently stands for Sensex at about Rs 770/share and a Price to Earnings ration of about 20.7 times. But that is not what we look at; the expected PAT growth because of the base effect for the next two quarters is expected to be 10% up for each quarter. this will take the Sensex EPS for FY10 close to about Rs 930/share and so the market is currently trading only at about 17 times FY10 expected earnings. With so much liquidity in the markets that is not too bad either.
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