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MOSL: Morning India (19/February/18): 1. India Strategy (3QFY18 Earnings Review); 2. MCX; 3. Prime Focus; 4. Gateway Distriparks

MOrning India (19/February/18):

Today’s top research theme
India Strategy: 3QFY18 Earnings Review: Earnings picture getting brighter
** After beginning on a strong note, the 3QFY18 earnings season lost sheen toward the end, led by disappointment from heavy-weights like SBI, Tata Motors, Lupin and ONGC. However, what’s more encouraging is that the earnings picture is getting brighter, with the recovery expected to gather pace in FY19.

** While aggregate sales and EBITDA were in line, profits missed our estimates. The miss at the PAT level for both MOSL and Nifty Universe can be entirely ascribed to PSU Banks – elevated provisions and MTM losses in the bonds portfolio dragged the bottom line.

** Global Cyclicals single-handedly drove the quarterly performance, led by Metals and OMCs. Defensives posted the fifth consecutive quarter of earnings decline, dragged by Healthcare and IT, while Domestic Cyclicals posted an 18% YoY PAT decline.

** Within Domestic Cyclicals, Auto, Cement, Private Banks and PSU Banks posted weaker-than-expected PAT growth.

** Earnings downgrade/upgrade ratio moderated QoQ – 65 companies’ saw earnings cut of 3%+ (58 in 2QFY18) and 43 companies saw earnings upgrades of 3%+ (49 in 2QFY18). The upgrade/downgrade ratio weakened from 0.84x to 0.66x.
** We cut Nifty EPS by 3.2% for FY18E (INR 471), and by 0.6% for FY19E (INR 595).

Piping hot news
Reliance Industries plans Rs60,000 crore integrated industrial area in Maharashtra
** Reliance Industries Ltd (RIL), India’s largest private sector enterprise, and its global partners will set up the country’s first integrated industrial area in Maharashtra with an investment of Rs60,000 crore, RIL chairman and managing director Mukesh Ambani said on Sunday.