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Tuesday, April 13, 2010

Midcap cos Jan-March earnings driven by demand, base effect - POLL

Most mid-cap firms are likely to post double digit growth in sales and profits for the Jan-March quarter, led by automobile, pharmaceuticals and banks, a Reuters poll showed.

About two-thirds of the 82 companies, whose sales and profit estimates were polled by Reuters, may report two-digit profit growth, while three-quarters may report sales growth of 10 percent or more, according to the poll of 16 brokerages.

"The earnings are going to see an exceptionally higher performance...The topline growth being larger, even if there is an impact on the margin, it would be partly taken care of," said Deven Choksey, head of research for brokerage K.R.Choksey.

Earnings will be also buoyant due to the base-effect, as most companies reported lower profits or losses in the year-ago quarter as the world reeled under the financial crisis.

"The implied revenue growth estimates for Q4-FY2010 work out close to 25-30 percent levels and the earnings growth estimates to around 15 percent," said Sharekhan in its preview report.

Stronger domestic consumption has led to buoyancy in auto sales, incremental retail offtake and spurt in real estate activity in metro cities, while pharmaceuticals may report robust earnings on higher domestic and US sales, analysts said.

Banks may benefit from a pick up in loan growth and interest income, but lower treasury gains and high NPA provisioning may drag, while high food inflation could eat into the growth for FMCG companies, brokerages said.

Cement, engineering and oil refineries may face a drop in their profits, as higher input costs with no corresponding price hikes have caused margins to shrink, analysts said.

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