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MOSL: India Strategy - Results review 1QFY20: All-round miss; earnings downgrade risks elevated

India Strategy - Results review 1QFY20: All-round miss; earnings downgrade risks elevated

 

Nifty EPS cut by 4%; downgrade/upgrade ratio weakens to ~3x

• The first-quarter corporate earnings-report season was disappointing in that both the Nifty and MOFSL Universe's performance was below our expectations. Moreover, commentaries have turned weaker across the board. Like in the previous quarter, 1QFY20 profits were entirely driven by Banks off a low base, while Commodities and Automobiles dragged the aggregates.
• Nifty sales/EBITDA/PAT grew 6.4%/2.8%/5.1% YoY versus our estimate of 5.8%/1%/11.5% YoY. Excluding Corporate Banks, Nifty PAT was down 6.4% YoY versus our estimate of a 3.8% decline. For the MOFSL Universe, sales/EBITDA/PAT were up 6.4%/3.2%/2.6% versus our estimate of 6.6%/1%/8% YoY.
• Of the 19 sectors we track, 2/9/8 posted profits that were above/in line/below our estimates. Of the 203 companies under our coverage, 67 exceeded estimates (80 in 4QFY19), 86 delivered a miss (68 in 4Q) and 50 were in line (47 in 4Q) on the PAT front.
• Banking accounted for more than 100% of incremental profits for the quarter. Of the total incremental profits of INR30b in the MOSL Universe, Banks contributed INR131b, while Metals/Automobiles/O&G depleted INR50/33/56b.