18 companies turned profitable in Q4 after 3 straight quarterly losses. Worth buying?

India Inc clocked healthy growth in its profits in the fourth quarter, beating most analysts' estimates. However, the topline growth remained soft, a trend that continued from the preceding quarters.

ETMarkets analysed the result performance of corporate India in the last fiscal year and found that about 18 companies turned profitable in the March quarter, after three consecutive losses in the previous quarters.

These 18 companies, with a market capitalisation of more than Rs 1,000 crore, include BHEL, Centrum Capital, Inox Wind, Piramal Pharma, Sagar Cements, SAMHI Hotels, Sterling and Wilson, among others.


Piramal Pharma

Piramal Pharma clocked a profit of Rs 89.23 crore in the fourth quarter after an average loss of Rs 43 crore in the preceding three quarters. Revenue from operations, meanwhile, increased 18% year-on-year to Rs 2,552 crore.

Analysts expect the company's EPS CAGR growth of 102% FY24-26E to be driven by CDMO due to continued increase in orders from on-patent molecules led by innovation related work and expansion in new geographies in CHG category.

"We value the company by applying a 19x EV/EBITDA multiple to the 12-month forward March 26 ending EBITDA of Rs 1,455 crore, arriving at a target price of Rs 180 per share," said Asit C Mehta Investment Interrmediates.

The company's stock returns were robust in the last one period with a gain of over 70%.

SAMHI Hotels

SAMHI Hotels, a recent debutant at the bourses, registered a net profit of Rs 11.29 crore in the fourth quarter as compared to a loss of Rs 74 crore in the preceding December quarter.

Most analysts were of the view that the company has seen a consistent improvement in its earnings, aided by industry tailwinds as well as debt reduction post the IPO issuance in September 2023.

"Being more a levered play, SAMHI has grown its rooms and as the cash flows improve, its interest costs would also further go down. Hence, you would see an EBITDA growth more importantly, a net profit growth much faster than the other peers in the hotels industry," said Vinay Jaising of JM Financial.

Ever since listing last year, the company's shares have returned about 31% to investors till date.

Sagar Cement

Sagar Cements, Andhra-based cement manufacturer with a capacity of 10.6 mt, has turned the table, after three straight losses, by reporting a profit of Rs 11.59 crore in the fourth quarter.

Geojit expects revenue and EBITDA of the company to grow at 13% and 44% CAGR over FY24-26E and values the business at 8.5x FY26E EV/EBITDA. The brokerage has a buy rating on the stock with a target price of Rs 258.

In the last one year period, the shares have been steady by offering 12.73% returns to investors.

Inox Wind Energy

Inox Wind Energy, which is into the business of wind turbine generators (WTGs) and wind energy solutions, recorded a profit of Rs 38.8 crore in the quarter ended March 2024. The company had seen losses of Rs 65 crore, Rs 59 crore and Rs 4 crore in the Q1, Q2 and Q3 of FY24, respectively.

Despite continuous losses on the earnings front, the stock more than tripled investors' wealth in the last one year period, rising as much as 240%.

What should investors do?

Analysts expect India Inc earnings should grow low double-digits in the current fiscal on the back of strong earnings growth from sectors like industrials, utilities, pharma and autos/

"The earnings could grow at around 12% for FY25. There is some chance that some of the capex-linked sectors might witness muted growth in Q1 due to elections, but that muted growth will reverse in subsequent quarters as government spending picks up. We expect muted IT and FMCG sector growth in the next couple of quarters," said Nishit Master, Portfolio Manager, Axis Securities PMS.

In the small- and mid-cap segment, where most of the above 18 companies come from, the market has seen a significant run-up, leading to their valuations exceeding their long-term averages. However, analysts believe the current valuations can be sustained, especially for the smallcap universe.

"This is due to their strong earnings growth potential and significantly improved RoEs, implying improved efficiency of their capital usage," Master said.

With data inputs from Ritesh Presswala

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)