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India Equity Research Reports, IPO and Stock News
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We think MSCI India could return 20% plus from current levels over the next 12 months and
outperform Asia ex-Japan from here as India-specific macro concerns seem priced in to us. That
said, we are reducing our earnings estimates and year-end price target.
Valuations at a discount to fair value and macro concerns now well discounted
MSCI India is now trading at about 13x 12M forward P/E on RBS top down estimates, a discount
to its historical 10-year average of about 14.2x. Slowing economic growth and persistent inflation
are now well discounted by investors. We now think the inflation trajectory could potentially
undershoot versus RBI and consensus expectations.
Relative valuations now on the high side but may reflect earlier estimate revisions
MSCI India currently trades at a 25-30% premium to Asia ex-Japan on 12M forward P/E versus
the historical average of about 18%. However, bottom-up Bloomberg consensus EPS estimates
for MSCI India have come down 9-10% since the start of the year, while there have been hardly
any revisions for MSCI Asia ex-Japan. Looking back to FY09, MSCI India’s earnings held up
much better than Asia ex-Japan (see chart 4).
Dec 2011 MSCI India price target reduced 6% to 750 reflecting our EPS cuts
We have cut our top-down MSCI India FY12/13 EPS estimates by 4/6%; our FY13 EPS estimate
is 4% lower than the bottom-up Bloomberg consensus, reflecting our more conservative stance
on materials and financials’ earnings.
Model portfolio favours interest rate sensitive stocks
Our model portfolio is unchanged from June (see Relative value, dated 7 June 2011); although
our sector tilts remain modest, the portfolio is biased towards infrastructure and interest rate
sensitive stocks (see table 4). Our key stock overweights from a portfolio perspective are HNDL,
LT, MSIL, CIPLA, CBK and POWF, and our key stock underweights are COAL, ACEM, JSTL and
DLFU.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We think MSCI India could return 20% plus from current levels over the next 12 months and
outperform Asia ex-Japan from here as India-specific macro concerns seem priced in to us. That
said, we are reducing our earnings estimates and year-end price target.
Valuations at a discount to fair value and macro concerns now well discounted
MSCI India is now trading at about 13x 12M forward P/E on RBS top down estimates, a discount
to its historical 10-year average of about 14.2x. Slowing economic growth and persistent inflation
are now well discounted by investors. We now think the inflation trajectory could potentially
undershoot versus RBI and consensus expectations.
Relative valuations now on the high side but may reflect earlier estimate revisions
MSCI India currently trades at a 25-30% premium to Asia ex-Japan on 12M forward P/E versus
the historical average of about 18%. However, bottom-up Bloomberg consensus EPS estimates
for MSCI India have come down 9-10% since the start of the year, while there have been hardly
any revisions for MSCI Asia ex-Japan. Looking back to FY09, MSCI India’s earnings held up
much better than Asia ex-Japan (see chart 4).
Dec 2011 MSCI India price target reduced 6% to 750 reflecting our EPS cuts
We have cut our top-down MSCI India FY12/13 EPS estimates by 4/6%; our FY13 EPS estimate
is 4% lower than the bottom-up Bloomberg consensus, reflecting our more conservative stance
on materials and financials’ earnings.
Model portfolio favours interest rate sensitive stocks
Our model portfolio is unchanged from June (see Relative value, dated 7 June 2011); although
our sector tilts remain modest, the portfolio is biased towards infrastructure and interest rate
sensitive stocks (see table 4). Our key stock overweights from a portfolio perspective are HNDL,
LT, MSIL, CIPLA, CBK and POWF, and our key stock underweights are COAL, ACEM, JSTL and
DLFU.
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