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RBS analysts' expectations for our India universe's September quarter earnings are muted
(as they were for the June quarter) as they estimate only 5% yoy net income growth with
margin pressures offsetting top-line growth of 15%. Will companies be able to beat this low
hurdle?
Margin pressures and base effect suggest muted earnings growth
RBS’s India analysts estimate only 5% yoy earnings growth for their universes (ex. Energy) in the
September quarter, down from 30% a year earlier and 13% in the prior quarter. Our analysts
expect net margins to decline 135bp yoy, partially offsetting the 15% growth in net sales that they
foresee. Please note that we exclude capital goods and power utilities companies from this
analysis as analyst coverage is being transitioned.
Key sector takeaways
Our analysts expect net margin compression across most sectors in India except in cement and
mining companies. Bucking the aggregate margin-compression trend, we expect cement
companies to post better net margins on a yoy basis (up 272bp) due to better pricing in south
India, which should drive a 78% yoy increase in net income. As in the June quarter, our analysts
expect private-sector banks’ earnings (up 22% yoy) to significantly outpace those of their publicsector
peers (up 3% yoy).
Will companies exceed expectations this quarter?
The expectations hurdle was quite low in the June quarter too with our analysts expecting only
7% yoy growth (ex. Energy); however, earnings were weaker than expected excluding the betterthan-
expected result from Tata Steel. We will be watching earnings reports closely to see if fullyear
consensus earnings expectations of 12% for FY12 will be met. In addition, banks’ asset
quality (especially that of public-sector banks) will be a key focus for investors.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
RBS analysts' expectations for our India universe's September quarter earnings are muted
(as they were for the June quarter) as they estimate only 5% yoy net income growth with
margin pressures offsetting top-line growth of 15%. Will companies be able to beat this low
hurdle?
Margin pressures and base effect suggest muted earnings growth
RBS’s India analysts estimate only 5% yoy earnings growth for their universes (ex. Energy) in the
September quarter, down from 30% a year earlier and 13% in the prior quarter. Our analysts
expect net margins to decline 135bp yoy, partially offsetting the 15% growth in net sales that they
foresee. Please note that we exclude capital goods and power utilities companies from this
analysis as analyst coverage is being transitioned.
Key sector takeaways
Our analysts expect net margin compression across most sectors in India except in cement and
mining companies. Bucking the aggregate margin-compression trend, we expect cement
companies to post better net margins on a yoy basis (up 272bp) due to better pricing in south
India, which should drive a 78% yoy increase in net income. As in the June quarter, our analysts
expect private-sector banks’ earnings (up 22% yoy) to significantly outpace those of their publicsector
peers (up 3% yoy).
Will companies exceed expectations this quarter?
The expectations hurdle was quite low in the June quarter too with our analysts expecting only
7% yoy growth (ex. Energy); however, earnings were weaker than expected excluding the betterthan-
expected result from Tata Steel. We will be watching earnings reports closely to see if fullyear
consensus earnings expectations of 12% for FY12 will be met. In addition, banks’ asset
quality (especially that of public-sector banks) will be a key focus for investors.
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