Q4FY12 Results Preview: Beginning of sales growth slowdown cycle ::Emkay PDF link

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

Q4FY12 Results Preview: Beginning of sales growth slowdown cycle (April 02, 2012)

Results Preview n         Earning expectation for Q4FY12E for Emkay Universe indicate continued moderation, with APAT growth of 1.6%YoY (ex financials & oil). This will be a marked deceleration from the actual 5.6%YoY in Q3FY12 n         Contrasting to previous quarters, Q4FY12 is likely to show sharp deceleration in sales growth. For our Universe sales growth is expected to decline to 15.9%YoY vs 20% in Q3FY12 n         Expected moderation in sales and APAT growth is likely to reflect in sustained decline in EBIDTA margin for our Universe, which is expected to contract nearly 100bp YoY at 19.3%. While there are clear signs of eroding pricing power upside risks to cost could imply downside surprise to earnings growth n         The Small Cap Emkay Universe seems to be impacted more adversely with expected sales and APAT growth at 6.6%YoY and -15.4%YoY respectively. Likewise, Emkay Universe ex-Top 5 companies is expected to experience moderate sales growth at 11.4% YoY and APAT contraction of 9.2%YoY  n         Almost 50% of our coverage companies are expected to show YoY contraction in APAT during Q3. But there are also a good 26% who are likely to exhibit 30%+ expansion % yoy growth Sales EBIDTA APAT Q3FY12A Q4FY12E Q3FY12A Q4FY12E Q3FY12A Q4FY12E Emkay Universe 19.8% 15.9% 12.5% 10.5% 5.2% 1.6% Emkay Large Cap 20.0% 16.1% 12.5% 9.9% 7.0% 1.5% Emkay Mid Cap 19.7% 15.5% 12.5% 15.3% -4.6% 5.1% Emkay Small Cap 16.9% 6.6% 10.8% 9.8% -8.0% -15.4% Source: Company, Emkay Research n         Outside of Financial and Oil sectors, robust APAT expansion is expected for Autos (30% YoY) & Auto ancillaries (29%), Consumers (25%), IT (20%) and Pharma (72%).  Stress is likely to be visible markedly in Engineering and Cap goods (-1% YoY), Metals & Mining (-43%) and Telecom (-7%) n         For Consumer Goods space APAT growth will likely be contributed by price increases in recent months but we think volume growth may disappoint. Conversely the Engineering & Capital goods are expected to exhibit the impact of macro slowdown in the form of longer execution cycles, unfavorable revenue mix and cost pressure  n         In line with the Q3 guidance, IT services sector is likely to see subdued sales growth in Q4FY12 with Tier I IT companies estimated to show modest 1.1-3.2% QoQ US$ revenue growth n         Our automobile universe is expected to show sales growth of 29% driven by volumes and pricing action. But large portion of the jump is expected form Tata Motors. Ex-TML subs, sales growth is expected to be much weaker at 15%. Similarly, while the EBIDTA is expected to rise 16%, ex-TML subs it is likely to remain muted at 4% n         Telecom sector is expected to see positive spill over from tariff hike and higher contribution from non-voice segment n         Key things to watch for:  Management concerns are likely to around (a) High interest rates, (b) Lack of infrastructure (c) Policy logjam (d) Input cost pressures & uncertainty in commodity prices, (e) weakening demand and (f)  continued volatility in rupee. Hence, management guidance in the backdrop of the above uncertainties and the Budget announcement, on demand outlook, future price actions and external demand will be critical      * Note: ex Banks & FS, FS - Others and Oil & Gas # Nos in bracket are % yoy change in PAT Q4FY12 Strong Results Large Caps Mid Caps Small Caps Adani Power Apollo Tyres Unichem Labs Allahabad Bank CESC BPCL Chambal Fertilisers Cipla Dewan Housing Dr. Reddy's Lab India Cements HPCL Jubilant FoodWorks Indian Oil KSK Energy Jaiprakash Power Ventures Manappuram General Finance Marico Mindtree Ranbaxy Labs South Indian bank Shree Cements Sterlite Tech State Bank of India Torrent Pharma Sun Pharma Tata Chemicals Tata Motors Tech Mahindra Titan Industries Q3FY12 Weak Results Large Caps Mid Caps Small Caps Grasim Industries Blue Star Godawari Power Hindalco IRB Infrastructure Gujarat Industries Power JSW Energy IVRCL HBL Power Systems JSW Steel Prestige Estates JK Paper Sesa Goa Punj Lloyd Tamilnadu Newsprint Sterlite Industries Sintex Industries Tata Steel Possible Surprises – Positives Name of the company EPS (Rs) yoy gr (%) Reason Ashok Leyland 1.1 -4.8 Margins to expansion led by higher production from Pantanagar and operating leverage Bhushan Steel 13.6 -0.1 Higher volume and realizations; Progress in Orissa phase III expansion and any guidance on iron ore availability key drivers Chambal Fertilisers 3.5 249 Higher realizations on IPP linked production. Strong revenue growth from fertilizer and trading revenues to increase Cipla 2.6 -2.3 Commencement of Lexapro formulation to Teva this quarter which is estimated to contribute USD60mn in revenues. Growth in domestic formulations is expected to be higher at 19% YoY Godrej Consumer 5.2 17.7 (1) strong traction in domestic home care segment and (2) continued momentum in soaps and hair color business. International business to report strong constant currency growth and also gain from translation benefit. Greaves Cotton 1.6 -4.1 Expect improvement after a dismal Q3FY12, (1) Healthy revenue growth from Engines, ramp-up in sales to Tata Motors and Infrastructure GSK Consumer 27.1 2.9 Gain from a blend of volume-led growth, price-led growth and mix-led growth Hero MotoCorp 34.3 36.5 Margins to benefit from favorable forex, moderation in metal prices and operating leverage benefits. Marico 1.4 300 Robust growth in Parachute and Saffola and International business to trigger revenue growth; Margin expansion Mindtree Ltd      13.9 77.9 Margins expected to improve aided by stable currency realization and operational leverage Punjab National Bank 42.8 13.0 20% YoY NII grow; Slippages to ramiain high but will matched by higher recoveries, resulting in decline in provision cost Reliance Power 0.8 21.0 Robust topline growth and strong pricing power, resulting in robust APAT growth South India Bank 1.1 57.9 Expect NII growth of 31% YoY driven by 30% loan growth.  Things to watch out -commentary on the gold loan portfolio 2) Impact of higher rates on  NRI deposit mobilization and cost of funds Sun Pharma 6.4 50.7 Strong revenue growth led by domestic formulations, Taro US revenues and new launches in US viz.Allegra OTC, Ultram and Lipodex. Operating margins likely to expand substantially Possible Surprises – Negatives Name of the company EPS (Rs) yoy gr (%) Reason Bajaj Auto 27.9 17.5 Lackluster quarter driven by vol growth Maruti Suzuki 19.4 -14.8 Positive on volume growth know but margins could decline 210 bps YoY due to full impact of adverse forex rates and higher royalty payment M&M 9.8 5.6 Adjusted EBITDA margins to decline 20 bps QoQ/ 120 bps YoY due to higher production from MVML; Impact of slowing tractor demand Reliance Industries 12.3 -25.4 Contraction in PAT despite reasonable revenue growth. Sequential decline in margin. Expect Gross Refining Margin (GRM) at $6.6 per bbl for Q4FY12E Rallis India 1.2 2.9 Weakening opricing power leading to margin contraction and weak APAT growth Voltas 2.0 -18.0 Expect weak performance from Voltas led by (1) muted revenues amidst pressure on EBITDA margins and (2) another round of provisioning on Sidra Medical project (Qatar) United Phosphorus 3.9 -30.3 North American revenues are expected to decline by 10% yoy to Rs 3.7bn. Europe is likely to report revenue decline of 2% yoy while RoW revenues are expected to increase by 10% yoy. APAT of Rs 1.8bn, a contraction of 27% yoy Click here to read report: Results Preview