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MOSL: Morning India (19/February/19): 1. India Strategy (3QFY19 Earnings Review – In-line quarter; domestic cyclicals led by financials stage a solid comeback); 2. Ambuja Cement; 3. Kaveri Seed Co.; 4. Metals W

MOrning India (19/February/19): 1. India Strategy (3QFY19 Earnings Review – In-line quarter; domestic cyclicals led by financials stage a solid comeback); 2. Ambuja Cement; 3. Kaveri Seed Co.; 4. Metals Weekly

 

Today’s top research theme

3QFY19 Earnings Review: In-line quarter; domestic cyclicals led by financials stage a solid comeback

• The December corporate earnings-report season for both Nifty and MOSL Universe was in line with our expectations, with domestic cyclicals led by financials picking up the baton from global cyclicals as the driver of earnings growth. Corporate Banks, IT and Consumer delivered a strong performance, while Autos and Cement disappointed.
• Top-line growth for MOSL Universe and Nifty was at a multi-quarter high. However, this failed to translate into concomitant EBITDA growth. Notably, EBITDA margin shrank 300-320bp for MOSL and Nifty Universe, dragged by OMCs.
• Corporate Banks showed a material sequential improvement in the slippage/asset quality trends. This provides good visibility on the earnings outlook, as Corporate Banks were one of the key drivers for the earnings miss over the past few years.
• Domestic cyclicals single-handedly drove the quarterly performance, led by financials. Defensives' growth was dragged by Telecom, which continues reporting elevated losses, while Global cyclicals after driving earnings growth for several quarters posted de-growth.
• Our FY19/20 Nifty EPS estimates have been cut by 2.8/3.0% to INR496/629 (prior: INR510/648). We expect Nifty EPS to grow 9.1% in FY19 and 26.7% in FY20. Nearly 81% of the earnings cut is driven by Tata Motors, SBI, HPCL and ONGC.

Piping hot news

Promoters sell 10% stake in Emami Ltd., raise ₹1,600 cr.

• The promoters of Emami Group announced a sale of 10% stake in Emami Limited, raising approximately ₹1,600 crore. The transaction was executed on the stock exchange on Monday and the purchasers included SBI Mutual Fund, PremjiInvest, Amundi, IDFC, L&T Mutual Fund and others. The stake sale proceeds will reduce the promoter debt, which was used in the creation of assets such as cement, solar power etc.