Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
The fault lines are clearly visible. In the backdrop of a perceptible
slowdown in macro‐environment, India Inc., faces another tough quarter
as Q3FY12 results estimates point to a tepid 3.3% PAT growth for Sensex
and 2.1% for the coverage universe. Drawdown in revenue trajectory also
continues with top line growth moderating to ~19.0% as margins remain
under pressure (EBITDA margins likely to contract by ~221bps). Highly
disconcerting is the breadth of negative earnings—almost a third of
companies under coverage are expected to post an earnings decline of
more than 20.0%. However, the stand‐out sector could be pharma, led by
a strong surge in the domestic market, favourable currency movement
and niche launches in the US.
Growth under fire, breadth in negative earnings widens
Earnings growth for Q3FY12 is likely to be weak with the Edelweiss coverage universe (ex‐
OMCs) expected to post a tepid 2.1% YoY growth, marking the fourth consecutive quarter
with a sub‐10% growth. Meanwhile, Sensex is expected to clock an earnings growth of
3.3% YoY, way below 12.1% in Q2FY12. Apart from this weary outlook, equally
disconcerting is the breadth of negative earnings revision as almost a third of companies
may post an earnings decline of more than 20%. The rupee has also depreciated 8%
against the USD in Q3FY12 and potentially could suppress reported profit growth. New
AS‐11 amendments, however, may provide some respite.
Revenues decelerate, margins on downward spiral
The revenue trajectory continues to moderate even as the top line is expected to grow by
19.0% YoY (ex‐OMCs) compared to 21.0% YoY in Q2FY12 and way below 25.2% recorded
in Q1FY12. Sectors that have seen a progressive decline in revenue growth include capital
goods where shrinking new order intake, especially from the power sector, has hampered
revenue visibility (Q3FY12e Y‐o‐Y revenue growth at 13.3% compared to 22.0% a year
back). In contrast, pharma sector is expected to post a stellar 23% top line growth, riding
strong surge in domestic market, favourable currency movement and niche launches in
the US. Overall, EBITDA margins remain under pressure and may well contract by 221bps
for our coverage universe (ex‐OMCs) and 250bps for the Sensex.
Downgrades persist to dent earnings outlook
EPS estimates continue to be downgraded with FY13 estimates being cut 3% during
Q3FY12 alone. This extends the total FY13 EPS downgrades to 11% in the current fiscal.
Consensus EPS estimates for Sensex for FY12 and FY13 now stand at INR1,140 and
INR1,316, respectively (Edelweiss: INR1,086 and INR1,260). Based on our macro
assessment, we believe there are further risks to the earnings trajectory. If GDP growth,
based on our stress case assumption, falters to 5.8% in FY13, earnings (in FY13) could be
downgraded to as low as INR 1,143.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
The fault lines are clearly visible. In the backdrop of a perceptible
slowdown in macro‐environment, India Inc., faces another tough quarter
as Q3FY12 results estimates point to a tepid 3.3% PAT growth for Sensex
and 2.1% for the coverage universe. Drawdown in revenue trajectory also
continues with top line growth moderating to ~19.0% as margins remain
under pressure (EBITDA margins likely to contract by ~221bps). Highly
disconcerting is the breadth of negative earnings—almost a third of
companies under coverage are expected to post an earnings decline of
more than 20.0%. However, the stand‐out sector could be pharma, led by
a strong surge in the domestic market, favourable currency movement
and niche launches in the US.
Growth under fire, breadth in negative earnings widens
Earnings growth for Q3FY12 is likely to be weak with the Edelweiss coverage universe (ex‐
OMCs) expected to post a tepid 2.1% YoY growth, marking the fourth consecutive quarter
with a sub‐10% growth. Meanwhile, Sensex is expected to clock an earnings growth of
3.3% YoY, way below 12.1% in Q2FY12. Apart from this weary outlook, equally
disconcerting is the breadth of negative earnings revision as almost a third of companies
may post an earnings decline of more than 20%. The rupee has also depreciated 8%
against the USD in Q3FY12 and potentially could suppress reported profit growth. New
AS‐11 amendments, however, may provide some respite.
Revenues decelerate, margins on downward spiral
The revenue trajectory continues to moderate even as the top line is expected to grow by
19.0% YoY (ex‐OMCs) compared to 21.0% YoY in Q2FY12 and way below 25.2% recorded
in Q1FY12. Sectors that have seen a progressive decline in revenue growth include capital
goods where shrinking new order intake, especially from the power sector, has hampered
revenue visibility (Q3FY12e Y‐o‐Y revenue growth at 13.3% compared to 22.0% a year
back). In contrast, pharma sector is expected to post a stellar 23% top line growth, riding
strong surge in domestic market, favourable currency movement and niche launches in
the US. Overall, EBITDA margins remain under pressure and may well contract by 221bps
for our coverage universe (ex‐OMCs) and 250bps for the Sensex.
Downgrades persist to dent earnings outlook
EPS estimates continue to be downgraded with FY13 estimates being cut 3% during
Q3FY12 alone. This extends the total FY13 EPS downgrades to 11% in the current fiscal.
Consensus EPS estimates for Sensex for FY12 and FY13 now stand at INR1,140 and
INR1,316, respectively (Edelweiss: INR1,086 and INR1,260). Based on our macro
assessment, we believe there are further risks to the earnings trajectory. If GDP growth,
based on our stress case assumption, falters to 5.8% in FY13, earnings (in FY13) could be
downgraded to as low as INR 1,143.
No comments:
Post a Comment