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QE Sep-11 Earnings
Preview: Challenging Quarter
in the Offing
Quick Comment: MS analysts forecast a 9% YoY fall
for 120 companies: This compares with 7% YoY
growth in QE Jun-11. Excluding government-owned oil
companies, earnings growth is expected to moderate to
6% YoY vs. a 10% YoY growth in QE Jun-11. MS
analysts expect Sensex earnings (ex-Coal India) to rise
3.4% YoY vs. 9% growth in QE Jun-11.
Another quarter of margin compression across
sectors: MS analysts expect aggregate revenues for
this set of companies to grow 20% YoY, a deceleration
of 6ppt from the previous quarter. EBITDA margins are
likely to contract by 167bps YoY for the aggregate
sample (excluding government-owned oil companies).
The Energy and Technology sectors will probably see
the most contraction. Our analysts expect strongest
earnings growth for Utilities (up 22% YoY), followed by
Consumer Staples (up15% YoY), whereas Telecom
companies are likely to report another quarter of fall
in earnings.
Key observations about our analysts’ forecasts:
a) Depreciation expenses to rise 11% YoY compared
with 22% in the previous quarter; and b) Net financial
income is likely to turn to net financial expense (down
from (+)Rs14.7bn to (-)Rs19.5bn). With the exception of
the Technology and Energy sectors, net financial
income is falling, or net financial expense is rising, for all
sectors. Telecoms, Industrials and Utilities will likely see
a significant increase in net interest expense.
Bottom line: Given how much earnings estimates have
been cut, we will keenly track surprise breadth (which
dropped to a multi-quarter low in the previous quarter).
The other thing to watch out for is the impact of the sharp
depreciation in currency and escalation in interest costs.
We will also look out for companies that exhibit pricing
power. Broad market earnings will also slow down this
quarter but may not fare worse than the narrow market.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
QE Sep-11 Earnings
Preview: Challenging Quarter
in the Offing
Quick Comment: MS analysts forecast a 9% YoY fall
for 120 companies: This compares with 7% YoY
growth in QE Jun-11. Excluding government-owned oil
companies, earnings growth is expected to moderate to
6% YoY vs. a 10% YoY growth in QE Jun-11. MS
analysts expect Sensex earnings (ex-Coal India) to rise
3.4% YoY vs. 9% growth in QE Jun-11.
Another quarter of margin compression across
sectors: MS analysts expect aggregate revenues for
this set of companies to grow 20% YoY, a deceleration
of 6ppt from the previous quarter. EBITDA margins are
likely to contract by 167bps YoY for the aggregate
sample (excluding government-owned oil companies).
The Energy and Technology sectors will probably see
the most contraction. Our analysts expect strongest
earnings growth for Utilities (up 22% YoY), followed by
Consumer Staples (up15% YoY), whereas Telecom
companies are likely to report another quarter of fall
in earnings.
Key observations about our analysts’ forecasts:
a) Depreciation expenses to rise 11% YoY compared
with 22% in the previous quarter; and b) Net financial
income is likely to turn to net financial expense (down
from (+)Rs14.7bn to (-)Rs19.5bn). With the exception of
the Technology and Energy sectors, net financial
income is falling, or net financial expense is rising, for all
sectors. Telecoms, Industrials and Utilities will likely see
a significant increase in net interest expense.
Bottom line: Given how much earnings estimates have
been cut, we will keenly track surprise breadth (which
dropped to a multi-quarter low in the previous quarter).
The other thing to watch out for is the impact of the sharp
depreciation in currency and escalation in interest costs.
We will also look out for companies that exhibit pricing
power. Broad market earnings will also slow down this
quarter but may not fare worse than the narrow market.
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