Q1FY12 Results Preview 21/14/7: A perfect funnel impact visible -- Emkay

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Q1FY12 Results Preview

21/14/7: A perfect funnel impact visible

Emkay Universe* is likely to post Sales growth of 20.9%, EBITDA growth of 14.1% and PAT growth of 7% for Q1FY12. Ebitda margins for Emkay Universe are expected to contract by 118 bps to 19.7%. PAT growth excluding the top 3 contributors (viz NTPC, Hind Zinc and TCS) to incremental PAT is just 2.1%. 53 out of 124 companies are likely to show negative PAT growth.

Interestingly it is showing a funnel impact  as earlier mentioned in our strategy report ‘Earnings @ Risk’.

Sectors like Power (27.9%), Telecommunications (24.4%), Engineering & Capital Goods (22.5%),  Agri Input & Chemicals (20.6 %) and Auto Ancillaries (19.7%) are expected to witness better yoy EBITDA growth while sectors like Print Media (13.3%) and Offshore Oil Field Services (6.7%) are likely to post yoy decline in EBITDA.

PAT growth will be contributed by sectors like Auto Ancillaries (36.9%), Engineering & Capital Goods (23%), IT Services (16.8%),  consumers (15.4%) and Agri Input & Chemicals (10.3%).  While sectors like Offshore Oil Field Services (51.3%), Paper (22.8%) and Print Media (17.4%) will witness de-growth in PAT.

Earnings momentum to remain subdued in banks owing to ~10% yoy decline in net profit for PSU Banks. Private Banks, on other hand, would deliver healthy 27% yoy growth in net profit

This quarterly season, although a lean one, will be very crucial for the direction of the market (with all due respect to liquidity). We will be keenly monitoring the management commentaries for economy/industry/company outlook.

Emkay Universe is trading at 14x FY12E earnings which is at a discount of 10% to Sensex PE of 15.5x FY12E consensus EPS of Rs 1232.

* Note: ex Banks & FS, FS - Others and Oil & Gas

Q1FY12 Strong Results

Large Caps	Mid Caps	Small Caps
Adani Power	GSFC	Godawari Power
Cadila Healthcare	India Cements	Piramal Glass
Godrej Consumer Products	Manappuram General Finance
Hindustan Zinc
Jaiprakash Power Ventures
Motherson Sumi
Petronet LNG
Reliance Communications
Sterlite Industries

Q1FY12 Weak Results

Large Caps	Mid Caps	Small Caps
JSW Energy	Aban Offshore	HBL Power Systems
Ranbaxy Labs	Corporation Bank	Tamilnadu Newsprint
Reliance Power	KSK Energy	TRF
Sesa Goa	Lanco Infratech	TRIL
	Nava Bharat Ventures
	Patni Computer
	Shree Cements
	Sterlite Tech
	Unichem Labs

Possible Surprises

Positives
Name of the company	EPS (Rs)	yoy gr (%)	Reason
Divis	7.3	15.0	Favorable product mix and lower than expected tax rates can surprise positively
eClerx	11.3	15.1	Could see marginally better show on revenues/margins along with higher than expected other income
Hexaware	1.6	-12.0	Margins could still surprise positively despite wage increments
HUL	2.7	14.0	Ebidta base effect coupled with strong volume growth
Jubilant Food Works	3.4	41.0	Surprise in same store sales growth
LIC Housing Finance	5.2	16.3	Lower than expected contraction in NIMs (-70bps qoq)
Sun Pharma	4.1	24.2	Higher than expected traction in existing products from Taro could lead to better realizations and margin improvement. Taxotere launched in Q1FY12 in US could also surprise positively on back of higher market share
Negatives
Name of the company	EPS (Rs)	yoy gr (%)	Reason
Asian Paints	22.7	-1.8	Negative surprise in volume growth
Canara Bank	16.5	-27.8	Additional provisions on NPAs
State Bank of India	37.1	-19.3	Additional provisions on NPAs
Titan	1.2	35	Negative surprise in volume growth