[T.S.R:18062] India Margins At 5 Year Lows, Downgrades Likely (BOAML)

 

Margins at 5-year lows

The bad news is that profit growth continues to be mediocre, growing 11.4%

during the quarter. The good news is that after sharp disappointments in the

previous 2 quarters, earnings were slightly ahead of our expectations for the

Sensex companies. Excluding oil PSUs, however, earnings were a slight

disappointment. Also, our earnings exclude forex mark to mark losses that impact

~3% of the Sensex earnings. However, the spread is still poor – almost half the

companies disappointed in earnings growth. Lastly, Margins continued to decline

with Sensex margins falling by 240bps and currently at 7-year lows.

Energy & Banks drive profit growth; Metals & telecom drag

Energy (RIL), Banks (ICICI Bank, HDFC Bank) and Consumers (ITC) were the

key profit drivers for Sensex earnings. The biggest contributors to slowdown in the

profit growth were Metals (TISCO, Hindalco), Bharti and DLF were the drag on

Sensex earnings.

Earnings downgrades continue; FY13 more at risk

The result season has seen FY12 Sensex EPS downgraded by 2% to Rs1115

and FY13 by 5% to Rs1275. This justifies our view that FY13 is at greater risk

than FY12 (we expect FY13 EPS to be downgraded to Rs1200).

Safe Harbor Statement:

Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.

 

Nothing in this article is, or should be construed as, investment advice.

 

 

 

 

 

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