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MOSL: Morning India (25/January/19): 1. India Strategy (Corporate profit to GDP); 2. Metals (Seven learnings from FICCI’s steel conference); 3. Yes Bank (New MD & CEO); 4. UltraTech Cement; 5. Pidilite Industri

MOrning India (25/January/19): 1. India Strategy (Corporate profit to GDP: Analyzing growth across cycles); 2. Metals (Seven learnings from FICCI’s steel conference); 3. Yes Bank (Appointment of new MD & CEO); 4. UltraTech Cement; 5. Pidilite Industries; 6. Bharti Infratel; 7.United Spirits

 

Today’s top research theme

India Strategy: Corporate profit to GDP: Analyzing growth across cycles; 2018 mirroring 2003 bottom

• We analyzed ‘corporate profit to GDP’ trends across 2003-18 using Nifty-500 as a proxy for corporate earnings as it contributes 93% of India’s market-cap.
• Over 2003-08, the ratio doubled from 2.8% to 5.5%, led by Metals, Telecom, Technology, Capital Goods and Cement. However, over the last decade, the corporate earnings distress in India has translated into a reduction in the profit/GDP ratio from 5.5% to 2.8%, dragged by PSU Banks, Oil & Gas, Metals and Telecom.
• Sectors that have been most stable and rising to prominence over these 15 years are Technology, NBFCs, Private Financials, Autos and Metals. Profits of these sectors as a percentage of GDP increased by 3-4x over 2003-18.
• We expect the trend in corporate profits/GDP to turn better, led by normalization of profits at Corporate Banks and gradually improving trends in capex cycle. Telecom and Utilities should also start contributing to earnings over next five years.

Piping hot news

Ravneet Gill is new Yes Bank MD and CEO

• Private sector lender Yes Bank on Thursday announced the appointment of Ravneet Gill as its new Managing Director (MD) and Chief Executive Officer (CEO) with effect from March 1, 2019. Gill, who will be taking the reins from the lender’s founder MD and CEO Rana Kapoor, is the CEO of Deutsche Bank’s India operations.