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MOSL: INDIA STRATEGY-4QFY17 interim earnings review-In-line so far-margin contraction evident

India Strategy: 4QFY17 interim earnings review; In-line so far; margin contraction evident

• 81 MOSL Universe companies and 24 Nifty companies have declared their 4QFY17 results as of Saturday, May 13, 2017.
  
• These companies comprise (a) 50% of estimated PAT for MOSL Universe and 52% of estimated PAT for Nifty, and (c) 38% of Indian market cap.
  

Key takeaways

• The 4QFY17 earnings season so far has been in line with expectations in terms of headline numbers. Of the 24 Nifty companies that have declared their results so far, 19 have reported earnings ahead of/in line with our estimates. The earnings upgrade/downgrade ratio is skewed in favor of downgrades, with 11 MOSL Universe companies seeing upgrades of 5%+ and 26 seeing downgrades of 5%+.
  
• The MOSL Universe has reported sales, EBITDA and PAT growth of 10.2%, 5% and 12.2% YoY, as against expectations of 11.2%, 2.7% and 10.4%, respectively.
  
• Sales/EBITDA/PAT for the 24 Nifty companies have grown 11.7%/1.6%/6.3% v/s expectation of 12%/(0.9%)/2.2%.
  
• Almost three-fourths (that is, 56) of the 81 MOSL coverage companies have reported EBITDA either in line with or above estimates. On the PAT front, 55 out of 81 companies either met or exceeded expectations. Ex-Financials, EBITDA margin declined 200bp YoY to 21.5% v/s estimate of 21%.
  
• -Based on the results of the 13 Sensex companies, we have raised our Sensex EPS estimates marginally by 0.7%/0.6% for FY18/FY19 to INR1,583/1,915. Upgrades are led largely by Bharti Airtel, Hero MotoCorp, Reliance while Infosys, TCS, Wipro and ICICI Bank have seen earnings downgrades.