FREE

MOSL: Morning India (09/April/18)-1. India Strategy 4QFY18 Preview (Earnings recovery imminent-More ladders than snakes); 2. Titan Company; 3. Capital First; 4. Oil & Gas 4QFY18 Preview

MOrning India (09/April/18): 1. India Strategy 4QFY18 Preview (Earnings recovery imminent; More ladders than snakes); 2. Titan Company; 3. Capital First; 4. Oil & Gas 4QFY18 Preview

 

Today’s top research theme

India Strategy: Earnings recovery imminent; More ladders than snakes

• Earnings recovery imminent; More ladders than snakes: We expect MOSL Universe PAT to grow 11% YoY on a high base (24% earnings growth in 4QFY17). Global cyclicals will drive the performance with 21% YoY profit growth and account for 65% of incremental profits while Defensives are expected to post modest 3% profit growth after five consecutive quarters of profit decline, aided by IT. Profit growth for MOSL Universe excluding PSU Banks and private corporate lenders is expected at 15%. Healthcare, Telecom, PSU Banks and Cement are expected to report muted numbers.
• Nifty highlights: Sales, EBITDA and PAT to grow at 14%, 11% and 14%, respectively. PAT growth of 14%, if delivered, will be the highest in 15 quarters.
• Nifty EPS changes: We have revised our Nifty EPS estimates downwards by 2% and 3% for FY18E and FY19E to INR462 and INR 577 vs. INR471 and INR595 earlier, respectively. We are now building in Nifty EPS growth of 11%/25%/21% for FY18/19/20.
• Three important trends: 1] Macros bottoming out - high frequency data pointing towards the same 2] Industrial capex is on a recovery path 3] Earnings recovery has been extremely narrow in FY17 and FY18 and is expected to get broader in FY19 and FY20 with Financials expected to make a comeback in FY19.

Piping hot news

Real estate developers pull out all stops to reduce debt

• Real estate developers, reeling under a massive burden of debt and dwindling sales, are pulling out all the stops to reduce leverage by raising equity capital, selling land, exiting long-term projects and non-core businesses. While large developers are tapping equity capital for debt repayment, other stressed realty firms, staring at defaults, are resorting to repeated refinancing of loans. Top office space developers like DLF Ltd, Indiabulls Real Estate Ltd (IBREL), Prestige Group have raised equity capital by selling stake in office projects, some of which will be used to reduce debt in their residential portfolio.