December quarter earnings of BSE-30 post note ban to stay flat: Kotak

December quarter earnings of the BSE-30 index post demonetisation is expected to remain flat on a year-on-year basis, along with earnings of several others which too may remain muted, says a report. According to Kotak Institutional Equities, while the December quarter earnings of Sensex companies are expected to stay flat on a yearly basis, on a quarter-on-quarter basis, it is likely to decline 2.3 per cent.

On the December 2016 quarter earnings preview, the report said, “We expect net income of the BSE-30 Index to be flat year-on-year and decline 2.3 per cent quarter-on-quarter in October-December quarter of 2016-17.”

Earnings of several sectors will be impacted by the government’s demonetisation push, Kotak Institutional Equities said, adding, the net income of automobile, consumer products, real estate and telecom sectors is expected to see year-on-year decline partly due to negative impact on sales volumes.

“We estimate BSE-30 Index’s 2016-17 EPS at Rs 1,420 and 2017-18 EPS at Rs 1,729. Our Nifty Index EPS estimates for 2016-17 and 2017-18 are Rs 430 and Rs 521 respectively,” the report said.

Regarding the earnings forecast for the automobile sector, the report said that most auto companies will see a weak quarter largely owing to muted volume growth and increase in commodity costs, which will likely impact EBITDA margin.

For the consumer products sector, December quarter is expected to be dismal, as aggregate revenues and EBITDA/PAT are likely to decline, while for the real estate sector, weak sales will result in increase of debt for most developers and new land tie-ups will slow down, it added.

Kotak Mahindra Group