Heat wave, elections in India create unlikely earnings winners and losers

By Harshita Swaminathan, Rachel Yeo and Justina T. Lee

A scorching summer and a long-drawn election in India may throw up some unlikely winners and losers this earnings season with consumption-linked firms Avenue Supermarts Ltd. and Bajaj Auto Ltd. slated to report next week.

Demand from villages and smaller towns outpaced that of cities in the April-June quarter in a sign of India’s broad-based economic growth. Avenue, the operator of DMart supermarkets, probably sold more cold beverages, ice cream and hygiene products as prolonged heat waves pushed temperature to new highs across India. Motorcycle maker Bajaj Auto’s monthly sales reports signaled fewer inquiries and deferred purchase decisions by potential customers due to the extreme weather. Both stand to benefit from forecast of an above-normal monsoon.

Finance Minister Nirmala Sitharaman is widely expected to propose measures to boost consumption when she presents federal budget on July 23 giving further impetus to consumer-facing firms and retailers that have been hit by weak rural spending in the past few quarters.

Meanwhile, Taiwan Semiconductor Manufacturing Co. is projected to record its strongest growth for quarterly earnings since the end of 2022. Sales for June also surpassed expectations amid rising demand for AI infrastructure. Earnings optimism pushed the firm’s Taipei-traded shares past NT$1,000 last week, briefly surpassing $1 trillion in market capitalisation.

The AI boom should also fuel demand for services offered by Indian IT exporters exporters Infosys Ltd. and Wipro Ltd. Sector leader Tata Consultancy Services Ltd. on Thursday reported profit that met analysts’ estimates, signaling corporations are gradually resuming spending on projects.

Highlights to look out for:

Saturday: Avenue Supermarts (DMART IN) profit should be lifted by its continued expansion of store count and improving consumption appetite in India. First-quarter revenue was up 18 per cent, the firm said in a pre-earnings update, and consensus projects 19 per cent profit growth. Lower share of apparel sales continued to impact revenue per square foot of store area, analysts at Citi said.

Tuesday: Bajaj Auto (BJAUT IN) may see the slowest profit expansion in five quarters as vehicle sales growth was muted by heat waves in several parts of India. According to the Federation of Automobile Dealers Associations, weather and elections led to lower footfalls at showrooms and delayed purchases. The company launched a new CNG-powered motorcycle earlier this month, which could help further boost its share in that product category, said Jefferies.

Wednesday: Asian Paints (APNT IN) first-quarter net income should fall 9.2 per cent, consensus estimates show. Revenue growth was muted due to price cuts and a weaker mix, said Jefferies. Gross margin gains are also expected to be partially offset by higher spending and negative operating leverage, according to Kotak Institutional Equities.

Thursday: TSMC (2330 TT) second-quarter net income likely rose 29 per cent, estimates show. Several brokerages including Morgan Stanley have raised price targets for the chipmaker as businesses race to secure hardware to build AI-supporting infrastructure. Key highlights for its upcoming earnings include how much TSMC can negotiate price increases after seeing strong product demand.

Infosys (INFO IN) first-quarter net income will likely find support from higher revenues across segments, estimates show, even though financial industry revenue fell slightly. Emerging technologies make up more than 60 per cent of its total sales, but the Indian IT company’s near-term growth is likely to remain pressured by weak enterprise IT spending, Bloomberg Intelligence said.

Friday: Wipro’s (WPRO IN) first-quarter revenue may be lower in constant currency terms, but its margins are expected to expand, as per estimates. Analysts at Nomura expect Ebit margins to expand on its continued cost control program and higher utilization at Capco. Recent strategic partnerships with other companies such as Siemens for automotive software should support the company’s earnings over the long term.