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India Equity Strategy
"Q" View - 3Q FY11 earnings review...
• 3Q FY11 Earnings – a mixed bag. Aggregate earnings growth for the Sensex
at 23% yoy was largely in-line with expectations. The breadth was however
disappointing. Also, growth was driven primarily by the Energy sector. Ex
Energy, earnings growth was a more sedate 15% yoy.
• Robust revenue growth…but margins disappointed. Revenues rose a robust
21% yoy (Ex Energy). But rising competition and increasing input costs took a
toll on profit margins, particularly for Telecom, Discretionary and Materials
sectors. For Financials, loan growth and NIMs sustained healthy levels though.
• Estimates cut through earnings season. Since early January, consensus
earnings estimates for the broad market (MSCI India) have been reduced by
about 1.2% for FY12E. The breadth of earnings revisions was also in favor of
downgrades. The street now estimates earnings growth of 22% for FY12E.
• Risks to current estimates. Beside a higher base effect (particularly over 4Q),
sticky inflation, tight liquidity and the weak trend in IP pose risks to current
street estimates. For FY12E, J.P. Morgan estimates earnings growth of 17% vs.
consensus estimates of 22%. We believe current street estimates for Telecom
and Financials are vulnerable.
• Sector strategy. We have been recommending a) an overweight stance on
global sectors for the early part of the year and b) buying into the weakness in
Financials and Industrials for a recovery into the second half. We are
underweight consumption.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Equity Strategy
"Q" View - 3Q FY11 earnings review...
• 3Q FY11 Earnings – a mixed bag. Aggregate earnings growth for the Sensex
at 23% yoy was largely in-line with expectations. The breadth was however
disappointing. Also, growth was driven primarily by the Energy sector. Ex
Energy, earnings growth was a more sedate 15% yoy.
• Robust revenue growth…but margins disappointed. Revenues rose a robust
21% yoy (Ex Energy). But rising competition and increasing input costs took a
toll on profit margins, particularly for Telecom, Discretionary and Materials
sectors. For Financials, loan growth and NIMs sustained healthy levels though.
• Estimates cut through earnings season. Since early January, consensus
earnings estimates for the broad market (MSCI India) have been reduced by
about 1.2% for FY12E. The breadth of earnings revisions was also in favor of
downgrades. The street now estimates earnings growth of 22% for FY12E.
• Risks to current estimates. Beside a higher base effect (particularly over 4Q),
sticky inflation, tight liquidity and the weak trend in IP pose risks to current
street estimates. For FY12E, J.P. Morgan estimates earnings growth of 17% vs.
consensus estimates of 22%. We believe current street estimates for Telecom
and Financials are vulnerable.
• Sector strategy. We have been recommending a) an overweight stance on
global sectors for the early part of the year and b) buying into the weakness in
Financials and Industrials for a recovery into the second half. We are
underweight consumption.
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