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MOSL: INDIA STRATEGY | 1QFY22 Results Review: Strong start to FY22

INDIA STRATEGY | 1QFY22 Results Review: Strong start to FY22

 

In line; Nifty FY22/FY23 EPS STABLE

• Corporate earnings in the first quarter of FY22 have been in line with the elevated expectations, aided by the deflated base of 1QFY21 and localized and less stringent lockdowns v/s 1QFY21. Sectoral earnings have diverged sharply on account of the impact of second Covid-19 wave and higher commodity prices impacting the margins of select sectors (Auto, Consumer Staples, and Durables). On the flip side, cyclical sectors such as Metals and Oil and Gas (O&G) have benefitted, driving in-line aggregate earnings. For the MOFSL Coverage Universe, the earnings downgrade to upgrade ratio for FY22 stands at 6:5 – as 59 companies have seen downgrades > 5%, while 47 companies have been upgraded by > 5%. Management commentaries across the board indicate an improvement in the demand environment post Jun’21, led by the easing of restrictions and sharp reduction in active Covid-19 cases. The pace of vaccination has picked up – average daily doses in August stand at 5.2m doses/day, v/s 4.3m doses/day in July. Amid the likelihood of a normal monsoon season, we expect corporate earnings to recover as economic activity picks up and pace of vaccination accelerates further.
• 1QFY22 has been an in-line earnings season for the MOFSL Universe. ~42% of companies in the MOFSL Coverage Universe have beaten our estimates, while 39% have missed our estimates.
• Nifty sales have been in-line (50% YoY; est. 48%), while EBITDA/PBT/PAT growth has come in at 41%/103%/101% YoY (est. 38%/89%/94%). Of the Nifty constituents, 42% have reported beats on our PAT estimates, while 34% have missed expectations.