TRITONS AND THE MINNOWS

As in every race, there are flag bearers and laggards; June 2009 quarter too had its share of winners and losers. ET Intel ligence Group brings you sec tors and companies, which have not only maintained growth trajectory but in some cases have also transcended analyst's estimates.  We also bring to you the sectors and companies, which saw their performance meter dipping.To put it in few words, they were the worst performing players of India Inc. Investors better be watchful, as the chances of recovery for these sectors are slim FMCG  • A mix of higher sales volumes and lower input costs aided the growth. While former helped the companies to post better than expected growth in sales, latter allowed them to protect their profit margin despite price reduction and discount offers.  • As economy recovers, the consumer demand may revive resulting in healthy volumes growth for FMCG companies. However poor monsoons rains continues to be a cause of concern for the sector.  • Dabur, Nestle, Marico and Godrej Consumer have done well. Hindustan Unilever did not do well due to muted growth in soaps & detergents and personal care products. CEMENT  • The profitability was driven by better than expected improvement in sales realisation, which reached record high in June '09 quarter. The industry also reported double digit volume growth due demand growth from rural India and government funded infrastructure projects.  • The good run is expected to continue for next few quarters though some experts are worried about the adverse impact of poor monsoon rains.  • There's also a likelihood of a supply gut in the industry with some 65 million tonnes of additional capacity expected to be added over the next 2 years.  • ACC, Grasim, Shree Cement, Ultratech Cement have done well. Ambuja Cements, Madras Cement, India Cement were the laggards POWER  • Lower raw material cost helped boost sector's net profit. In fact, in a quarter, when other companies have seen sharp upsurge in interest cost, this sector has seen a marginal increase of only 1.5% in interest cost.  • The performance in the coming quarter may be hit by a rebound in input prices. The supply of gas from KG basin will boost the profitability of gas-based plants.  • Tata Power, Power Grid Corp and Torrent Power have done well. Neyveli Lignite has lagged its peers in performance. REAL ESTATE  • The change in product mix from high margin luxury apartments to low mid housing segments affected sector's performance. Though, the residential segment has seen recovery, retail and commercial segment continue to languish.  • The sector has to reduce its dependence on borrowed funds. Developers have realized increasing volumes will now drive growth and profitability. Hence, they have launched the products in mid market/affordable segment and have also cut down the prices of existing projects. This might revive demand a bit, but margins will remain muted. HOSPITALITY  • Double whammy in terms of terror attacks and global economic downturn resulted in 15-20% drop in occupancy.  • Coming quarters would be tough for companies. Occupancy rates continue to be low and most hotels have nearly halved their room rates in a bid to boost sales.  • EIH, Asian Hotels, Indian Hotels performance took a hit during the quarter. OIL & GAS  • Crude prices have halved in June '09 quarter compared to same period in corresponding year. This has helped the oil marketing companies but has worked to disadvantage of oil producers.  • Oil marketing companies are expected to continue to report profits for next two quarters, as oil prices are expected to remain low.  • Indian Oil, BPCL, HPCL, which reported hefty profits due to negligible under-recoveries were the star performers . Even Gujarat State Petronet (GSPL), which gained from a 40% jump in transported volumes of natural gas, did well. Standalone refiners such as Reliance Industries, MRPL and Chennai Petroleum were losers as their gross refining margins reduced to half. BANKS  • Higher treasury income helped bank post better results than analyst estimate. This was due to volatility in the yields of government securities (g-sec) which led to sharp movement in their prices.  • High cost of funds continues to affect bank's performance. Though, the banks have cut down deposit rates, but the impact will be visible only from third quarter onwards. The growth in credit off take continues to remain muted at around 16%. It will be tough for banks to replicate June'09 quarter performance in coming quarters.  • State Bank of India, HDFC Bank, Axis Bank, Bank of Baroda and Punjab National Bank were the star performers. AUTO  • Driven by higher sales volumes and sharp fall in metal prices, automakers came out with a street beating performance during the quarter ended June '09.  • Most heartening for the industry was the emergence of first signs of a recovery in the commercial vehicle sales, which were hit the hardest in the slow down.  • Next few quarters may bring more goodies for the industry, as second half of the financial year is always better due to festival sales. Poor monsoon rains may however dampen the spirits with two-wheelers and farm equipment likely to take the biggest hit.  • Hero Honda, Maruti Suzuki, Tata Motors, Bajaj Auto, Mahindra & Mahindra were the lead performers. However, TVS Motor and Ashok Leyland were the laggards SHIPPING  • Shipping companies continue to grapple with sluggish global trade volumes. Moreover, spot freights have also fallen on y-o-y basis.  • In tanker segment, spot average freight rates declined by as much as 88% y-o-y. Indian companies have a majority of fleet capacity in this segment. Though, the companies have long-term contacts with customers, but that could help offset the impact of weak freight rates only partially.  • In short term spot freight rates are expected to remain weak.  • GE Shipping and Shipping Corporation of India were worst affected companies in the June'09 quarter.