Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Earnings cuts have outweighed upgrades by 56% in 1Q, although commodityprice-
linked upgrades have helped raise overall Sensex EPS by 1%. We are
marginally below consensus on earnings, but relatively more bullish on
rerating on a 12-month view. Our conviction levels appear to be significantly
higher than consensus for HDFC Bank, Tata Consultancy, Bharat Forge,
Titan and Tata Power, while we are significantly more negative on Bajaj
Auto, Mundra Port, Ambuja Cements, HCL Tech and JSW Energy.
Earnings momentum down despite Sensex upgrade. Over the past
three months our Sensex FY12 EPS has moved up 1%, but this is due to a
few high-weight commodity sectors and masks the broader downward
trend in earnings. In our coverage universe of 132 companies, 54 have
seen cuts in FY12 earnings in 1Q11, whereas consensus estimates have
been cut for 87 of these. Cuts outweigh upgrades by 54:43 for our
estimates, versus 87:45 for consensus estimates, and are concentrated in
domestic consumption, infra, capital goods and property. As much as 53%
of our cuts are over 5%, but the proportion of upgrades that are greater
than 5% is a far smaller 27%.
Where’s the variance? Although the 0.7% cut in consensus Sensex EPS
may suggest a divergent trend in revisions, it reflects the more bullish
consensus stance in early 2011: the gap with our estimate has now
narrowed to just 1%. However, we remain more bullish on property
earnings (7% higher), while lagging on energy (7% lower) and consumer
staples (6% lower). Our cuts have been sharper in consumer discretionary
and telecoms, but our upgrades in energy earnings have been much
stronger than the street’s.
Rerating rather than earnings is key to market recovery. While our
Sensex EPS estimate is marginally lower than consensus, our bottom-up
Sensex target is 5% ahead of the street at 22,581. With developed-world
monetary policy likely to remain loose, an easing in short-term yields
and a pickup in policy action during 2Q11 could support the rerating of
the Indian market multiple. DLF (DLFU IB - Rs253.3 - O-PF), HDFC
(HDFC IB - Rs682.8 - BUY), M&M (MM IB - Rs686.3 - BUY), ONGC
(ONGC IB - Rs283.1 - BUY) and Tata Steel (TATA IB - Rs613.5 - BUY)
are Sensex stocks where our FY12 earnings estimates are below
consensus but we see rerating potential.
Conviction calls. Stocks where we are above consensus on EPS and
target price and where the earnings-revision trend is upward include:
HDFC Bank (HDFCB IB - Rs2,306.7 - BUY), Tata Consultancy (TCS IB -
Rs1,139.3 - O-PF), Bharat Forge (BHFC IB - Rs338.3 - BUY), Titan
Industries (TTAN IB - Rs3,580.6 - O-PF) and Tata Power (TPWR IB -
Rs1,329.8 - BUY). Those where we are below consensus and the earningsrevision
trend is downward include Bajaj Auto (BJAUT IS - Rs1,406.9 - UPF),
Mundra Port (MSEZ IB - Rs136.3 - U-PF), Ambuja Cements (ACEM IB
- Rs138.5 - SELL), HCL Technologies (HCLT IB - Rs479.6 - U-PF) and JSW
Energy (JSW IB - Rs71.4 - SELL).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Earnings cuts have outweighed upgrades by 56% in 1Q, although commodityprice-
linked upgrades have helped raise overall Sensex EPS by 1%. We are
marginally below consensus on earnings, but relatively more bullish on
rerating on a 12-month view. Our conviction levels appear to be significantly
higher than consensus for HDFC Bank, Tata Consultancy, Bharat Forge,
Titan and Tata Power, while we are significantly more negative on Bajaj
Auto, Mundra Port, Ambuja Cements, HCL Tech and JSW Energy.
Earnings momentum down despite Sensex upgrade. Over the past
three months our Sensex FY12 EPS has moved up 1%, but this is due to a
few high-weight commodity sectors and masks the broader downward
trend in earnings. In our coverage universe of 132 companies, 54 have
seen cuts in FY12 earnings in 1Q11, whereas consensus estimates have
been cut for 87 of these. Cuts outweigh upgrades by 54:43 for our
estimates, versus 87:45 for consensus estimates, and are concentrated in
domestic consumption, infra, capital goods and property. As much as 53%
of our cuts are over 5%, but the proportion of upgrades that are greater
than 5% is a far smaller 27%.
Where’s the variance? Although the 0.7% cut in consensus Sensex EPS
may suggest a divergent trend in revisions, it reflects the more bullish
consensus stance in early 2011: the gap with our estimate has now
narrowed to just 1%. However, we remain more bullish on property
earnings (7% higher), while lagging on energy (7% lower) and consumer
staples (6% lower). Our cuts have been sharper in consumer discretionary
and telecoms, but our upgrades in energy earnings have been much
stronger than the street’s.
Rerating rather than earnings is key to market recovery. While our
Sensex EPS estimate is marginally lower than consensus, our bottom-up
Sensex target is 5% ahead of the street at 22,581. With developed-world
monetary policy likely to remain loose, an easing in short-term yields
and a pickup in policy action during 2Q11 could support the rerating of
the Indian market multiple. DLF (DLFU IB - Rs253.3 - O-PF), HDFC
(HDFC IB - Rs682.8 - BUY), M&M (MM IB - Rs686.3 - BUY), ONGC
(ONGC IB - Rs283.1 - BUY) and Tata Steel (TATA IB - Rs613.5 - BUY)
are Sensex stocks where our FY12 earnings estimates are below
consensus but we see rerating potential.
Conviction calls. Stocks where we are above consensus on EPS and
target price and where the earnings-revision trend is upward include:
HDFC Bank (HDFCB IB - Rs2,306.7 - BUY), Tata Consultancy (TCS IB -
Rs1,139.3 - O-PF), Bharat Forge (BHFC IB - Rs338.3 - BUY), Titan
Industries (TTAN IB - Rs3,580.6 - O-PF) and Tata Power (TPWR IB -
Rs1,329.8 - BUY). Those where we are below consensus and the earningsrevision
trend is downward include Bajaj Auto (BJAUT IS - Rs1,406.9 - UPF),
Mundra Port (MSEZ IB - Rs136.3 - U-PF), Ambuja Cements (ACEM IB
- Rs138.5 - SELL), HCL Technologies (HCLT IB - Rs479.6 - U-PF) and JSW
Energy (JSW IB - Rs71.4 - SELL).
No comments:
Post a Comment