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MOSL: MOrning India (04/June/19): 1. India Strategy (Result review 4QFY19; Financials drive performance); 2. EcoScope (RBI expected to adopt a delicate balancing act); 3. United Spirits (Ample opportunities ahe

MOrning India (04/June/19): 1. India Strategy (Result review 4QFY19; Financials drive performance); 2. EcoScope (RBI expected to adopt a delicate balancing act); 3. United Spirits (Ample opportunities ahead); 4. Cement

 

Today’s top research theme

India Strategy: Result review 4QFY19; Financials drive performance; Consumption drags

Nifty EPS stable; Broader universe see more downgrades than upgrades

• The 4QFY19 corporate earnings-report season was in line with our expectations for both the Nifty and the MOFSL Universe. Domestic Cyclicals continued driving earnings growth for the second consecutive quarter, led by Financials, which contributed almost the entire earnings delta but still fell short of expectations.
• Sales/EBITDA/profit growth for the Nifty came in at 10.2%/6.1%/15.8% v/s expectations of 11.1%/3.4%/16.8%. For the MOFSL Universe, sales/EBITDA/profit growth stood at 10.6%/7.3%/23.6% v/s expectations of 11.5%/5.1%/29.4%.
• Notably, the EBITDA margin for the MOFSL (ex-Financials & OMCs) Universe shrank by 100bp to 19.1%, dragged by Automobiles, Consumer, Metals, O&G and Telecom. On the other hand, Cement and Utilities delivered YoY expansion in the operating margin.
• Nifty EPS grew 7% to INR481 in FY19. Our Nifty FY20/21 EPS estimates remain unchanged at INR604/706, building in growth of 25.6%/16.9%.
• Top upgrades (FY20E): UPL, SBI, Tata Motors and Tata Steel have seen EPS upgrades of 32.4%, 23.3%, 13.8% and 9.3%, respectively.
• Top downgrades (FY20E): Asian Paints, Hindalco, Sun Pharma and Bharti Infratel have seen EPS downgrades of 16.5%, 12.9%, 8.8% and 7.9%, respectively.

Piping hot news

Bond yields below 7% for first time since Nov. 2017

• Amid expectations of yet another interest rate cut by the Reserve Bank of India later this week, yield on the 10-year benchmark bond fell below 7% for the first time since November 2017. The government bond yield ended at 6.99% on Monday, against the previous close of 7.03% on Friday