India Strategy
QE Jun-13 Earnings Preview:
Another Dreary Quarter
Quick Comment: For QE Jun-13, MS analysts’ forecast
an earnings decline of -1% YoY for 111 MS covered
companies (ex-Oil PSUs) vs. 1% YoY growth in the QE
Mar-13. They expect Sensex companies’ profits to
decline by 1% YoY against the 7%YoY growth seen in
QE Mar-13.
Excluding the Oil PSUs, revenue growth for MS
coverage likely to be at record lows: Our analysts
expect revenue growth to decelerate to 3%YoY vs.
6%YoY growth in the previous quarter. Excluding Oil
PSUs, EBITDA margins are likely to expand by
42bpYoY. However, Financials, Materials, Industrials,
Technology, Healthcare and Consumer Discretionary
are likely experience margin contraction. Analysts
expect the strongest earnings growth for Energy,
Healthcare and Consumer Staples, whereas Materials,
Industrials and Consumer Discretionary will see most
fall in earnings.
Key observations about our analysts’ forecasts:
1) Depreciation expenses are set to rise by 5% YoY and
taxes will likely decline by 1% YoY. 2) Net financial
income estimated at Rs17.2 billion in 1QF14, up 8%
YoY for the MS coverage universe.
Bottom line: 1QF14 earnings season is likely to be
another quarter of consolidation for earnings around
trough levels. EBITDA margins are likely to be expand
for the fourth quarter running, albeit by a small amount.
The dispersion in earnings is still high and aggregate
earnings may not reveal this. Our macro corporate
profitability proxy suggests broad market earnings
growth in the range of -7% to 19% with a likely print of
7.2% for the quarter, compared with -3.7% in the
previous quarter and 4.1% a year ago.
QE Jun-13 Earnings Preview:
Another Dreary Quarter
Quick Comment: For QE Jun-13, MS analysts’ forecast
an earnings decline of -1% YoY for 111 MS covered
companies (ex-Oil PSUs) vs. 1% YoY growth in the QE
Mar-13. They expect Sensex companies’ profits to
decline by 1% YoY against the 7%YoY growth seen in
QE Mar-13.
Excluding the Oil PSUs, revenue growth for MS
coverage likely to be at record lows: Our analysts
expect revenue growth to decelerate to 3%YoY vs.
6%YoY growth in the previous quarter. Excluding Oil
PSUs, EBITDA margins are likely to expand by
42bpYoY. However, Financials, Materials, Industrials,
Technology, Healthcare and Consumer Discretionary
are likely experience margin contraction. Analysts
expect the strongest earnings growth for Energy,
Healthcare and Consumer Staples, whereas Materials,
Industrials and Consumer Discretionary will see most
fall in earnings.
Key observations about our analysts’ forecasts:
1) Depreciation expenses are set to rise by 5% YoY and
taxes will likely decline by 1% YoY. 2) Net financial
income estimated at Rs17.2 billion in 1QF14, up 8%
YoY for the MS coverage universe.
Bottom line: 1QF14 earnings season is likely to be
another quarter of consolidation for earnings around
trough levels. EBITDA margins are likely to be expand
for the fourth quarter running, albeit by a small amount.
The dispersion in earnings is still high and aggregate
earnings may not reveal this. Our macro corporate
profitability proxy suggests broad market earnings
growth in the range of -7% to 19% with a likely print of
7.2% for the quarter, compared with -3.7% in the
previous quarter and 4.1% a year ago.