India's Q1 earnings season to test demand as heavyweights report
A barrage of results from India's largest companies next week will provide a crucial gauge of consumption trends and sector-specific momentum amid a cautious broader market.
Roughly 400 Indian companies, including index heavyweights like Adani Enterprises, L&T, and Maruti Suzuki, are scheduled to report June-quarter earnings next week. The results will mark a significant escalation in the domestic earnings season. Investors are looking for concrete signals on corporate health after a subdued end to the previous week.
On Friday, the benchmark Sensex fell 332 points, or 0.43%, to close at 76,059.77, while the Nifty 50 dropped 102 points, or 0.43%, to 23,767.45. Broader markets also retreated, with the Nifty Midcap 100 and Smallcap 100 indices declining 0.10% and 0.32% respectively.
The consumer staples sector will command particular attention as Hindustan Unilever, ITC, and Dabur prepare to release their figures. “The consumer staples sector will be closely watched as Hindustan Unilever, ITC and Dabur announce quarterly earnings, providing investors with valuable insights into rural and urban consumption trends, pricing power and demand conditions,” said Ponmudi R, CEO of Enrich Money.
Expectations for ITC are heavily skewed by recent taxation changes that are expected to severely impact its core cigarette business. Motilal Oswal forecasts an 18% year-on-year revenue decline and an 11% volume drop in that division. “We model a 25% YoY decline in cigarette EBIT and margins to compress significantly YoY due to insufficient price hikes. In the FMCG business, we project a 30% EBIT growth, with a 90bp margin expansion,” the brokerage said.
For Hindustan Unilever, Kotak Institutional Equities estimates a 10% year-on-year increase in like-for-like revenue. The firm projects standalone underlying volume growth of 6%, driven by a 16% surge in home care sales and 7.5% growth in beauty and personal care, both supported by recent price increases. However, some weakness in tea is expected to weigh on its foods and refreshments segment.
Outside the consumer space, defense and telecom outlooks diverge significantly. Bharat Electronics is expected to report a 16% revenue increase on the back of a ₹740 billion order book. “We expect margins to remain healthy at 29%, up 90bp YoY. The finalisation of orders, execution of the huge backlog, incremental share of exports, and further indigenisation of modules and subsystems will remain key focus areas,” Motilal Oswal noted.
Indus Towers faces headwinds from a slowdown in telecom network expansion. Kotak models its adjusted EBITDA rising just 1% quarter-on-quarter, anticipating net tower additions of only 2,500. “We model in lower QoQ net tower additions of 2,500 and net tenancy additions of 4,375 for the quarter, driven by slower network expansion by telcos,” the firm said.
