India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Q1FY12 RESULTS PREVIEW
18% revenue growth expected during the quarter (ex Oil & Gas)
We expect stocks under our coverage (ex-banking / NBFCs) to report revenue
growth of about 26% on a YoY basis. This is partly helped by the scale up in
revenues of Cairn India. Ex - Oil & Gas, revenue growth is expected to be about
18.1%. Among others, Cement, Capital Goods and IT are expected to propel this
growth. Revenues of Auto and IT companies are expected to be driven by volumes.
Higher execution levels should drive revenues of capital goods companies. We will
watch our for execution issues, if any, in construction and capital goods sectors.
Banks / NBFCs under our coverage are expected to post a 19.2% rise in NII. Credit
growth saw marginal drop to 20.7% YoY (as on June 17, 2011) as against 21.1%
witnessed in prior fortnight (June 03, 2011); however, it was higher than 19.5%
growth witnessed a year ago. Deposit mobilization has slightly improved to 18.2%
(as on June 17, 2011) as against 13.9% witnessed a year ago.
Moreover, we expect 15-20 bps compression in NIM during Q1FY12 (QoQ) on back
of lagged impact of deposit re-pricing at higher rates. However, this would be partly
compensated by the recent hike in lending rates as assets are re-priced faster than
the deposits. However, banks are likely to witness stable NIMs on YoY basis due to
slightly lower base in Q1FY11.
Margins are expected to be steady for our coverage universe (ex-
Oil & Gas)
EBIDTA margins for the companies under our coverage are expected to remain
steady on a YoY basis (ex Oil & Gas). Most of the sectors, except Capital Goods &
Power, Cement and FMCG are expected to witness pressure on margins. The
pressure on margins is due to higher raw material prices, which companies have not
been able to pass on fully. Moreover, higher attrition and salaries are expected to
hurt margins of IT companies.
As far as banks are concerned, pre-provisioning profits are expected to rise by about
8.6% v/s a 19.2% rise in NIIs. A relatively lower treasury profit is expected to have
an impact. We also expect asset quality to stabilize during Q1FY12. PSU banks are
likely to report slightly higher slippages with the shift to system-based NPA
recognition. However, strong recoveries & up-gradation are likely to cushion from
any sharp rise in overall NPAs. At the other end, private sector banks would further
witness improvement in their asset quality leading to lower credit costs. NBFCs are
expected to report a growth of about 14.8% in pre-provisioning profits, better than
the banking space.
Focus on concerns
While 1QFY12 results will be important, the focus has been and is expected to be on
some of the other pressing concerns.
Domestically, we will focus hard on the execution issues, if any, faced by capital
goods and construction companies. More importantly, the order bookings by large
capital goods and construction companies during the quarter will be of interest to us.
The past few quarters have seen a slow-down in order flows, though there have
been some signs of pick up in 1QFY12. We will also keenly hear the management
comments on any momentum in decision - making and order - flows for these
companies.
Inflation and the increase in interest rates will remain a focus point for the markets.
To that extent, stocks of debt heavy companies are expected to remain under
pressure. Also all rate sensitive sectors will be watched with caution by the markets
in the short term, we understand.
We will also maintain a close watch on the global commodity prices. These are
expected to impact margins in 1QFY12. While prices have moderated a bit in
1QFY12, further moderation is expected. However, increase in the commodity prices
from these levels may keep margins of corporate India under pressure, if the
increases are not fully passed on. Any lingering impact may dampen sentiments.
Conclusion
Markets have been on an uptrend since the past two weeks on expectations of
reduction in commodity prices and early indications of reforms by the Government.
In such a scenario, corporate results assume greater importance if the markets have
to sustain and move higher from the current levels. Expectations are not very high,
in our view, in the backdrop of un-enthusing IIP numbers and high inflation / interest
rates, which is a positive for the markets.
We opine that, if the markets have to sustain the current levels and move up, it will
need to have more confidence in the medium-to-long term growth rates of
Corporate India. Also, the above-mentioned concerns have to be effectively and
immediately addressed.
The room for disappointment is very limited, in our view. Disappointment in earnings
or on future outlook may result in corresponding specific corrections.
No comments:
Post a Comment