India EquiLogic - 2Q Preview - Happy times, but will they last?
Sep ’10 quarter is likely to see profit growth (+20%) for the Nifty companies. This will be the last quarter to receive benefits of low base effect. 2Q profit growth would be led by Materials, Industrials, Autos/Consumer Discretionaries and Staples, while Telecom and Healthcare would be the key laggards.
n 20% growth likely in Nifty profits. 2QFY11 will be the last quarter to see dual benefit of low-base effect and recovery in cyclicals and result in Nifty profit growth of 20%. For FY11, we estimate 26% yoy (down from 28% in 1QFY11) growth versus consensus expectation of 22-23%.
n Materials remains key earnings growth driver. The Materials sector would account for 45% of incremental profits for the quarter. Nifty (ex Materials) would see profit growth of only 12%. Low base effect and higher commodity prices would boost profitability in Materials.
n Non-consensus view. Our analysts’ earnings expectations are higher-than-consensus for RPower (+47% vis-à-vis consensus), RCom (+35%), Idea (+17%), Cairn (+10%) and Maruti (+8%). Our analysts’ earnings expectations are lower than consensus for Tata Power (-16%), DLF (-21%), ACC (-15%), Ambuja (-14%), PNB (-10%), Tata Motors (-13%) and GAIL (-10%).
n Likely sector leaders and laggards. Materials (+115% yoy PAT growth), Industrials (+50%), Energy (+18%), Financials (+17%), IT Services (+16%), Consumer Discretionaries (+12%) and Staples (4%) would lead the earnings season, in terms of profit growth. The laggards would be Telecom (-21%) and Healthcare (-4%).
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