Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sticky macro headwinds to shadow strong revenue growth
High input and borrowing costs to weigh on earnings
Rising prices of essential commodities i.e. copper, crude and agro
commodities for the past six to nine months will start playing out its
full impact on operating margins of India Inc in Q1FY12E. Coupled
with this, RBI’s action on interest rates will lead to a substantial rise
in borrowing costs for corporates, which will eat into profitability
margins, on the other hand. The above is quite evident from the
expectations that we have built in our Q1FY12 estimates of our
coverage universe. Like the past quarters, revenue growth remains
strong as the I-direct coverage universe (excluding oil & gas) is
expected to grow at 18% YoY. However, the strong revenue profile
will get dislocated with declining operating margins (rising input
and manpower costs) as we expect the EBITDA of our coverage
universe (excluding oil & gas) to grow 11.1% YoY. A key highlight
for Q1FY12E will be the profitability pain emerging from rising
interest rates in the economy as Q3FY11 and Q4FY11 saw
aggressive tightening from the central bank. Consequently, earnings
growth (excluding oil & gas) of 4.6% YoY will not match up with the
topline growth of our coverage companies.
Sectoral leaders and sectoral laggards
In terms of leaders (good revenue growth, stable margins and high
PAT growth), we expect IT (reasonable demand growth),
Automobiles (consistency in demand), Tier I Capital goods
companies (High execution and better operational efficiency) and
Pharma (Healthy growth in domestic formulation and US business)
to produce strong results. In terms of sector laggards (tepid
execution, high input costs, high working capital and high
borrowing costs), we expect the construction (tepid execution and
high working capital requirement), cement (higher input costs
denting operating margins and high borrowing costs for expansion
to hurt PAT growth) and telecom (declining ARPUs amid high
operating leverage) to report a decline on a YoY basis.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sticky macro headwinds to shadow strong revenue growth
High input and borrowing costs to weigh on earnings
Rising prices of essential commodities i.e. copper, crude and agro
commodities for the past six to nine months will start playing out its
full impact on operating margins of India Inc in Q1FY12E. Coupled
with this, RBI’s action on interest rates will lead to a substantial rise
in borrowing costs for corporates, which will eat into profitability
margins, on the other hand. The above is quite evident from the
expectations that we have built in our Q1FY12 estimates of our
coverage universe. Like the past quarters, revenue growth remains
strong as the I-direct coverage universe (excluding oil & gas) is
expected to grow at 18% YoY. However, the strong revenue profile
will get dislocated with declining operating margins (rising input
and manpower costs) as we expect the EBITDA of our coverage
universe (excluding oil & gas) to grow 11.1% YoY. A key highlight
for Q1FY12E will be the profitability pain emerging from rising
interest rates in the economy as Q3FY11 and Q4FY11 saw
aggressive tightening from the central bank. Consequently, earnings
growth (excluding oil & gas) of 4.6% YoY will not match up with the
topline growth of our coverage companies.
Sectoral leaders and sectoral laggards
In terms of leaders (good revenue growth, stable margins and high
PAT growth), we expect IT (reasonable demand growth),
Automobiles (consistency in demand), Tier I Capital goods
companies (High execution and better operational efficiency) and
Pharma (Healthy growth in domestic formulation and US business)
to produce strong results. In terms of sector laggards (tepid
execution, high input costs, high working capital and high
borrowing costs), we expect the construction (tepid execution and
high working capital requirement), cement (higher input costs
denting operating margins and high borrowing costs for expansion
to hurt PAT growth) and telecom (declining ARPUs amid high
operating leverage) to report a decline on a YoY basis.
No comments:
Post a Comment