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MOSL: INDIA STRATEGY-1QFY19 interim earnings review; Mixed bag; ICICI Bank and Tata Motors drag and drive 3.6% Nifty EPS cut

India Strategy: 1QFY19 interim earnings review; Mixed bag; ICICI Bank and Tata Motors drag and drive 3.6% Nifty EPS cut; Autos disappoint across the board

 

• 105 MOSL Universe companies and 32 Nifty companies have released their 1QFY19 results until July 31, 2018. So far, 62%/69% of the MOSL Universe companies have posted PAT and EBITDA that are either in line with or above our estimates. However the narrative on earnings hasn't changed and as Corporate Banks and Tata Motors pulled the aggregates down. Overall PAT growth has been below our estimate, dragged by (a) Corporate-focused Private Banks owing to accelerated provisioning expenses even as fresh slippage generation has moderated, and (b) Across the board miss on Autos, barring Ashok Leyland. Excluding Corporate Banks, PAT has been in line with estimate for MOSL Universe but below estimates for Nifty.
• We note that companies that have reported their earnings so far comprise (a) 61% of estimated PAT for the MOSL Universe, (b) 63% of estimated PAT for the Nifty, and (c) 53% of India's market capitalization.

 Key takeaways

• The 1QFY19 earnings season has so far been mixed with aggregates impacted, as has been the case for last few quarters now, by Corporate Banks and Tata Motors. Even as revenue and EBITDA have met our estimates, profits have missed our estimates, largely dragged by Corporate-focused Private Banks, owing to accelerated provisioning even as fresh slippage generation has moderated. Of the 32 Nifty companies that have declared their earnings, 20/25 have either met or exceeded our estimates on the PAT/EBITDA front. The earnings upgrade/downgrade ratio is < 1, with 23 MOSL Universe companies witnessing upgrades of 3%+ and 43 witnessing downgrades of 3%+.