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INDIA STRATEGY: 4QFY18 interim earnings review; Results largely in line excluding PSB and Private Corporate Banks

India Strategy: 4QFY18 interim earnings review; Results largely in line excluding PSB and Private Corporate Banks; Consumption picking up

 

• 143 MOSL Universe companies and 38 Nifty companies have released their 4QFY18 results until 22nd May 2018. So far, 61%/66% of the MOSL Universe companies have posted PAT and EBITDA that were either in line or above our estimates. However, overall PAT growth has been below our estimate, dragged by PSBs and corporate-focused private banks owing to accelerated provisioning post the new Feb'18 RBI framework on asset quality. Excluding PSU banks, PAT has been in line with estimate.
• We note that companies that have reported their earnings so far comprise (a) 59% of estimated PAT for the MOSL Universe, (b) 66% of estimated PAT for the Nifty and (c) 58% of India's market capitalization.

 Key takeaways:

• The 4QFY18 earnings season has so far been broadly in line with expectations if one were to exclude PSU banks. Even as revenue and EBITDA have met our estimates, profits have missed our estimates, largely dragged by PSBs and corporate-focused private banks, which reported a significant jump in slippages and provisions after the new RBI framework on asset quality (Feb'18). Of the 38 Nifty companies that have declared their earnings, 24 have either met or exceeded our estimates. The earnings upgrade/downgrade ratio stands < 1, with 35 MOSL Universe companies witnessing upgrades of 3% and 48 witnessing downgrades of 3%.
• For the MOSL Universe, sales, EBITDA and PAT grew 15.3%, 5.2% and (26.4%) YoY, as against expectations of 15.3%, 6.0% and 5.5%, respectively. Excluding PSU banks and private corporate banks, sales, EBITDA and PAT grew 16.3%, 12.1% and 14.3% v/s expectations of 16.4%, 10.6% and 11.3%, respectively.
• Sales, EBITDA and PAT for the 38 Nifty companies have grown at 15.7%, 9.9% and (2.2%), as against expectations of 15.4%, 7.7% and 12.7%, respectively. Excluding PSU banks and corporate-focused private banks, Nifty sales, EBITDA and PAT have grown 16.8%, 12.1% and 12.9% v/s expectations of 16.7%, 9.7% and 11.5%, respectively.
• Approximately 66% (i.e. 95) of the 143 MOSL coverage companies have reported EBITDA either in line or above our estimates. On the PAT front, 87 of the 143 companies have either met or exceeded our expectations.