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MOSL: INDIA STRATEGY-2QFY19 interim earnings review-Largely in-line so far; FY19 Nifty earnings lowered by 2%

India Strategy: 2QFY19 interim earnings review; Largely in-line so far; FY19 Nifty earnings lowered by 2%

 

• 80 MOSL Universe companies and 28 Nifty companies have released their 2QFY19 results until October 2018. So far, 66%/80% of the MOSL Universe companies have posted PAT and EBITDA that are either in line or above our estimates. However, the broader narrative around earnings has not changed much with continued earnings downgrades. Nevertheless, ICICI Bank's numbers and commentary mark a refreshing change from the perspective of earnings recovery in private corporate banks and the broader market's earnings trajectory.
• We note that companies that have reported their earnings so far comprise (a) 53% of estimated PAT for the MOSL Universe, (b) 57% of estimated PAT for the Nifty and (c) 44% of India's market capitalization.  

Key takeaways

• The 2QFY19 earnings season has been uneventful so far, with headline numbers broadly meeting estimates with a few disappointments. Of the 28 Nifty companies that have announced their earnings, 18/23 have either met or exceeded our estimates on the PAT/EBITDA front. The earnings upgrade/downgrade ratio is < 1, with 13 MOSL Universe companies witnessing upgrades of 3%+ and 27 witnessing downgrades of more than 3% - still suggesting a tepid earnings backdrop.
• For the MOSL Universe, sales, EBITDA and PAT grew 25.8%, 13.9% and 6.3% YoY, as against expectations of 23.6%, 14.1% and 9.0%, respectively.
• Sales, EBITDA and PAT for the 28 Nifty companies have grown at 27.0%, 14.1% and 5.8%, as against expectations of 24.4%, 13.2% and 9.0%, respectively.
• Approximately 79% (i.e. 63) of the 80 MOSL Universe companies have reported EBITDA that is either in line or above our estimates. On the PAT front, approximately 66% (i.e. 53) of the 80 companies have either met or exceeded our expectations.
• Among the Nifty constituents, Yes Bank, IndusInd Bank, Ultratech Cement, BPCL, Bharti Airtel, HCL Tech and Reliance Industries have missed our PAT estimates, while ICICI Bank, Bajaj Finance and Dr. Reddy's have exceeded our estimates.