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Q3FY12 RESULTS PREVIEW
For the quarter, we expect the companies under our coverage to report a
revenue growth of 15.7% ex-Banking/Oil & Gas. Margins are expected to be
lower on account of raw material prices and Rupee depreciation. Profits for
these companies are expected to rise by 8%. For Banks/NBFCs we expect NII
growth of 13% on moderating credit growth. Profits are expected to rise by
11%.
16% revenue growth expected during the quarter
We expect stocks under our coverage (ex-banking / NBFCs) to report revenue
growth of about 16% on a YoY basis mainly propelled by the IT sector and scale-up
in revenues of Cairn India. IT sector revenues would be driven by higher volumes
and the rupee depreciation. We forecast moderation in revenue growth for Capital
Goods and Construction companies. We will watch out for execution issues, if any,
in Construction and Capital Goods sectors.
For Banks / NBFCs, we expect muted credit growth during Q3FY12. Credit growth
saw marginal drop to 17.2% YoY (as on December 16, 2011) as against 17.8%
witnessed in prior fortnight (December 02, 2011); however, it was lower than 23.8%
growth witnessed a year ago. Growth in deposit mobilization has overtaken the loan
growth during last two quarters - it came at healthy levels (18.2% as on December
16, 2011) as against 14.8% witnessed a year ago.
Moreover, we are expecting flat/marginal compression in NIM (QoQ) during Q3FY12
(again depending on the CASA mix or liability franchise of the individual banks) as
banks are almost through with the last leg of deposit re-pricing at the meaningfully
higher levels. However, NBFCs are likely to witness continued compression on their
margins, as borrowing costs for them have been rising with limited scope to charge
higher rates from borrowers on back of moderating loan growth.
Margins are expected to be lower for our coverage universe
EBIDTA margins for the companies under our coverage are expected to be lower on
a YoY basis. Most of the sectors, except IT, Media, FMCG and Cement are expected
to witness pressure on margins on YoY basis. The pressure on margins is due
to pressure on revenues (Shipping) and higher raw material prices (Automobiles,
Capital Goods) which companies have not been able to pass on fully. For the Capital
Goods companies, cost of imports would have risen due to the sharp decline in Rupee.
On the other hand, EBITDA margins of IT companies should remain intact due
to benefit from Rupee depreciation and no salary increments (except Mahindra
Satyam).
As far as banks are concerned, pre-provisioning profits are expected to rise by about
8.9% v/s a 13.5% rise in NIIs. A relatively lower treasury profit is expected to have
an impact. We also believe asset quality pressure to persist even though banks have
already shifter to system based NPA recognition system. We will be very closely
watching the corporate book especially exposure to sensitive sectors like power,
aviation, textiles, construction etc. NBFCs are expected to report a muted growth of
about 9.2%.
Forex impact, interest cost and impact of slowdown would be the
key concerns to be watched out for
During the quarter, the Rupee has depreciated sharply against the USD, which
should entail higher cost for importers. Several companies have outstanding forex
borrowings to be repaid in 2012-13. Depending on the accounting policy, corporates
with foreign borrowings may take MTM (mark to market) hit in their P&L.
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. We will also keenly
hear the management comments on any momentum in decision - making and order
flows for these companies. Working capital cycle has also increased for the engineering
sector and we would monitor the same. For power utilities, a key
monitorable would be receivables from SEBs. We have seen a rise in receivables
from state utilities in Q2FY12 results.
Inflation and the increase in interest rates will remain a focus point for the markets.
To that extent, results of debt heavy companies will be watched with caution and so
also the results of all rate sensitive sectors, we understand.
While global commodity prices have eased a bit, but benefits of the same would be
offset by the decline in Rupee.
We will also closely track the management comments on the impact of the global
economic issues on client decisions and budgets. This will be more important for the
prospects of the IT sector.
Conclusion
Markets have been very choppy and have remained under pressure since the past
few months due to the global economic concerns and also domestic issues - scams,
lack of decision making, high inflation, etc. In such a scenario, corporate results assume
greater importance. Management outlook for FY13 would be of interest to us.
Post the H1 FY12 numbers, there have been significant earnings downgrades in
Capital Goods, Infrastructure, Power, Banking and Logistics sectors. Thus, expectations
are not very high from these sectors, in our view, which may limit the downside.
Apart from Q3 numbers, markets would also be influenced by policy initiatives, currency
movement, as well as developments in Europe and US. The room for disappointment
is very limited, in our view. Disappointment in earnings or on future outlook
may result in corresponding/specific corrections.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Q3FY12 RESULTS PREVIEW
For the quarter, we expect the companies under our coverage to report a
revenue growth of 15.7% ex-Banking/Oil & Gas. Margins are expected to be
lower on account of raw material prices and Rupee depreciation. Profits for
these companies are expected to rise by 8%. For Banks/NBFCs we expect NII
growth of 13% on moderating credit growth. Profits are expected to rise by
11%.
16% revenue growth expected during the quarter
We expect stocks under our coverage (ex-banking / NBFCs) to report revenue
growth of about 16% on a YoY basis mainly propelled by the IT sector and scale-up
in revenues of Cairn India. IT sector revenues would be driven by higher volumes
and the rupee depreciation. We forecast moderation in revenue growth for Capital
Goods and Construction companies. We will watch out for execution issues, if any,
in Construction and Capital Goods sectors.
For Banks / NBFCs, we expect muted credit growth during Q3FY12. Credit growth
saw marginal drop to 17.2% YoY (as on December 16, 2011) as against 17.8%
witnessed in prior fortnight (December 02, 2011); however, it was lower than 23.8%
growth witnessed a year ago. Growth in deposit mobilization has overtaken the loan
growth during last two quarters - it came at healthy levels (18.2% as on December
16, 2011) as against 14.8% witnessed a year ago.
Moreover, we are expecting flat/marginal compression in NIM (QoQ) during Q3FY12
(again depending on the CASA mix or liability franchise of the individual banks) as
banks are almost through with the last leg of deposit re-pricing at the meaningfully
higher levels. However, NBFCs are likely to witness continued compression on their
margins, as borrowing costs for them have been rising with limited scope to charge
higher rates from borrowers on back of moderating loan growth.
Margins are expected to be lower for our coverage universe
EBIDTA margins for the companies under our coverage are expected to be lower on
a YoY basis. Most of the sectors, except IT, Media, FMCG and Cement are expected
to witness pressure on margins on YoY basis. The pressure on margins is due
to pressure on revenues (Shipping) and higher raw material prices (Automobiles,
Capital Goods) which companies have not been able to pass on fully. For the Capital
Goods companies, cost of imports would have risen due to the sharp decline in Rupee.
On the other hand, EBITDA margins of IT companies should remain intact due
to benefit from Rupee depreciation and no salary increments (except Mahindra
Satyam).
As far as banks are concerned, pre-provisioning profits are expected to rise by about
8.9% v/s a 13.5% rise in NIIs. A relatively lower treasury profit is expected to have
an impact. We also believe asset quality pressure to persist even though banks have
already shifter to system based NPA recognition system. We will be very closely
watching the corporate book especially exposure to sensitive sectors like power,
aviation, textiles, construction etc. NBFCs are expected to report a muted growth of
about 9.2%.
Forex impact, interest cost and impact of slowdown would be the
key concerns to be watched out for
During the quarter, the Rupee has depreciated sharply against the USD, which
should entail higher cost for importers. Several companies have outstanding forex
borrowings to be repaid in 2012-13. Depending on the accounting policy, corporates
with foreign borrowings may take MTM (mark to market) hit in their P&L.
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. We will also keenly
hear the management comments on any momentum in decision - making and order
flows for these companies. Working capital cycle has also increased for the engineering
sector and we would monitor the same. For power utilities, a key
monitorable would be receivables from SEBs. We have seen a rise in receivables
from state utilities in Q2FY12 results.
Inflation and the increase in interest rates will remain a focus point for the markets.
To that extent, results of debt heavy companies will be watched with caution and so
also the results of all rate sensitive sectors, we understand.
While global commodity prices have eased a bit, but benefits of the same would be
offset by the decline in Rupee.
We will also closely track the management comments on the impact of the global
economic issues on client decisions and budgets. This will be more important for the
prospects of the IT sector.
Conclusion
Markets have been very choppy and have remained under pressure since the past
few months due to the global economic concerns and also domestic issues - scams,
lack of decision making, high inflation, etc. In such a scenario, corporate results assume
greater importance. Management outlook for FY13 would be of interest to us.
Post the H1 FY12 numbers, there have been significant earnings downgrades in
Capital Goods, Infrastructure, Power, Banking and Logistics sectors. Thus, expectations
are not very high from these sectors, in our view, which may limit the downside.
Apart from Q3 numbers, markets would also be influenced by policy initiatives, currency
movement, as well as developments in Europe and US. The room for disappointment
is very limited, in our view. Disappointment in earnings or on future outlook
may result in corresponding/specific corrections.
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