FMCG, cement, oil and gas, IT sectors to propel Sept quarter profit growth By DIPEN SHAH, KOTAK SECURITIES We expect stocks under our coverage (excluding banking/NBFCs) to report revenue growth of about 10.7 per cent on a year on year basis. Among sectors, FMCG, cement, oil and gas, IT and logistics are expected to propel this growth. Revenues of IT companies are expected to be driven by volumes and the sharp rupee depreciation. Cement sector revenue would be mainly driven by higher cement prices prevailing during the quarter. Revenue growth of Capital Goods and Construction companies is expected to moderate in the quarter, a reflection of subdued order intake in the past quarters. These are difficult times for the infrastructure and project related sectors. We will watch out for execution issues, if any, in Construction and Capital Goods sectors. The Auto sector revenues are forecast to decline in 2Q due to contraction in volumes. For banks/NBFCs, net interest income is expected to register a growth of 13.4 per cent. The non-food credit growth came at 16.1 per cent YoY (as on September 21, 2012), largely stable during Q2FY13, although it remained lower than 19 per cent growth witnessed a year ago. During the same period, the pace of deposit mobilisation slowed (13.8 per cent YoY as on September 21, 2012), as many banks cut their interest rates on FDs last month to reduce their cost of funds. We expect NIM to remain flat QoQ with negative bias during Q2FY13, as banks are likely to benefit from relatively less tight liquidity conditions as well 25bps cut in CRR by RBI. Many banks have also reduced the lending rates during last quarter which is likely to be partly off-set by easing liquidity conditions as well as reduction in their term deposits. Ebidta margins for the sectors under our coverage are expected to be a tad higher on a year-on-year basis. Except for auto, oil and gas, power and capital goods, other sectors will likely report higher margins YoY. For IT, margins are expected to be higher, largely due to the sharp depreciation of rupee v/s various currencies. Aided by higher realisations, cement sector margins are seen expanding robustly, albeit on a low base of the second quarter of FY12. On the other hand, Auto sector margins are forecast be decline due to impact of lower volumes. Benefit of soft metal prices is seen being offset by rupee appreciation. As far as banks are concerned, pre-provisioning profits are expected to rise by about 13.9 per cent v/s 12.7 per cent rise in NIIs due to muted treasury profit. We also expect restructured book to rise especially on corporate book side as there has been large addition to the CDR in recent times. However, private sector banks are better placed with significant exposure to retail assets and this segment is doing better in terms of asset quality. While 2QFY13 results will be important, the focus has been and is expected to be on some of the other pressing concerns. Domestically, we will focus hard on the order bookings of capital goods and construction companies. The past few quarters have seen a slow-down in order flows and the same is largely expected to have continued in 2QFY13. We will also keenly hear the management comments on any improvement in decision - making and order - flows for these companies. In the current economic scenario, working capital of manufacturing and project oriented companies remains a key variable to monitor.