Preview Of Q1FY16 Results Of Mid-cap Sector

We expect the companies in our mid-cap coverage universe to post muted revenue/EBITDA/net profit growth of 10.1%/11.2%/5.7%, respectively, for the June 2015 quarter. Taking into account the current challenging environment, CCL Products (CCL), JBF Industries (JBF), Just Dial (JDL), La Opala RG (LORL), V-Guard Industries (VIL), V-Mart Retail (VRL) and Bata India (BIL) are expected to post good results while Adi Finechem (AFL), Arvind, Credit Analysis & Research (CARE), Crisil and Supreme Industries are likely to report a weak performance. Additional volume and nil income-tax at Vietnam plant of CCL is likely to drive its net profit up 18.4% to Rs239mn. Healthy growth in paid listings and operating leverage would drive JDL’s EBITDA by 29.1% to Rs568mn. Growth in distribution network, launch of new products and better margins would drive LORL’s net profit 29.8% to Rs79mn.Ramp-up in capacity from US$400bn investment would improve JBF’s operaing profit by 38.1% to Rs2,871mn. Healthy cash flow and better margin would improve VIL’s net profit by 18.8% to Rs264mn. New store addition would drive net profit by 24.9% for VRL, despite weak demand. With no problem on supply chain side, BIL would report 8% revenue growth and 14.6% net profit growth. High tax rate, delay in capacity expansion, high margin base because of one-offs and downturn in tocopherol (35% of revenue) would lead AFL to report a steep decline in net profit. Weak demand at Brands & Retail division, lower cotton prices and weak volume growth in textile business would hurt Arvind’s revenue and profitability. Weak growth in SME (small and medium enterprise) rating business would impact CARE/Crisil growth, leading to 5.3%/14.5% decline in net profit, respectively. Weak deamand and lower margin would lead to a mere 4.8% rise in net profit of Kajaria Ceramics (KCL) to Rs404mn. Healthy MDF (medium density fibre) board division’s revenue would partially offset subdued demand for plywood in case of Greenply Industries. Subdued domestic growth and weakness in the euro may impact subsidiary Sylvania’s performance and this coupled with high pension liatbility would restrict Havells India’s net profit growth to15.4% at Rs1,248mn. Following strong non-rating business revenue, overall net profit growth is expected to be 9.6% in case of ICRA.

1QFY16 Mid-Cap Sector Preview-10 July 2015