Q1FY12 Results Review: Slowdown in earnings clearly visible (Emkay)

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Q1FY12 Results Review

Slowdown in earnings clearly visible

The overall quarterly numbers were marginally below our expectations. We expected 20.9%, 14.1% and 7% growth in Net Sales, EBITDA and PAT repectively from Emkay Universe* (ex- Oil & Gas and Banking); the actual turned out to be a growth of 22%, 13.9% and 6.1%. We expected EBITDA margin to decline by 118 bps, the actual turned out to be a decline of 139 bps.

However, the PAT growth number is skewed in favour of a few companies. Excluding the top 3 / top 5 contributors to the incremental PAT, the PAT growth is significantly lower at 0.3%/-2%.

As expected, the ‘Funnel impact’ is clearly visible. The increased policy rates by RBI will keep pressure on demand and hence corporate profitability.

Post Q1 results; we have revised earnings of 86 companies (20 upwards, 66 downwards). We have also changed recommendation for 24 companies (9 upgraded, 15 downgraded) and changed target prices of 84 companies (36 upwards, 48 downwards).

Emkay Universe companies are estimated to show 15.3%/14.7%/7.4% growth in sales, EBITDA and PAT for FY12E. Sensex consensus EPS for FY12E is now revised downwards to Rs 1,203 against Rs 1,232 in July 2011. The FY13E estimate still remains high at Rs 1,407 and we believe that it will get revised downwards by Q3FY12.

Emkay Universe is currently trading at 12.4xFY12E and 10.5xFY12E earnings which is at a 7%/8% discount to consensus Sensex PE of 13.4x FY12E consensus EPS of Rs 1,203 and 11.5x FY13E consensus EPS of Rs 1,407

Surprises

Positive		Negative
Andhra Bank		Adani Power
Century Plyboards		Bharat Bijlee
Corporation Bank		Blue Star
Gujarat Gas		Cadila Healthcare
India Cements		Dishman Pharma
Jubilant Life Sciences		Global Offshore Services
Lakshmi Machine Works		HEG
Mahindra Satyam		IVRCL
Maruti Suzuki India		JK Tyre
Petronet LNG		Lanco Infratech
Rallis India		Motherson Sumi
Reliance Power		Panacea Biotec
Sesa Goa		State Bank of India
Ultratech Cement		Sterlite Tech
		Tamilnadu Newsprint
		Union Bank of India