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MOSL: Morning India (26/May/20): 1. India Strategy (4QFY20 interim earnings review; Financials lead broad-based drag); 2. HDFC; 3. Avenue Supermarts; 4. Havells India; 5. Trent; 6. Jindal Steel & Power; 7. Birl

MOrning India (26/May/20): 1. India Strategy (4QFY20 interim earnings review; Financials lead broad-based drag); 2. HDFC; 3. Avenue Supermarts; 4. Havells India; 5. Trent; 6. Jindal Steel & Power; 7. Birla Corp.; 8. DCB Bank

 

 

Today’s top research theme

India Strategy: 4QFY20 interim earnings review; Financials lead broad-based drag; Sharp cut in forward estimates

• The March quarter earnings season has brought to the fore the challenging time that lies ahead along with multiple headwinds and moving parts.
• 4QFY20 earnings of 74 MOFSL Universe and 26 Nifty companies that have announced results as at 23rd May'20 are below expectations.
• Sales, EBITDA, PBT and PAT for the 26 Nifty companies have grown 1.9%, 8.6%, -11.9% and -13.8% YoY, respectively (v/s est. 2.3%, 7.6%, 7.6% and 8.9% YoY, respectively). Of the 26 Nifty companies that have declared results, 6 have surpassed, 14 have missed and 6 have met our expectations on the PAT front.
• For the MOFSL Universe, sales, EBITDA, PBT and PAT grew 1.5%, 9.7%, -10.7% and -12% YoY, respectively (v/s est. 2.3%, 8.3%, 2.9% and 5.3% YoY, respectively).
• The earnings upgrade/downgrade ratio for FY21 is significantly skewed in favor of downgrades so far, with 47 MOFSL Universe companies witnessing downgrades of more than 3% and 10 witnessing upgrades of more than 3%. 29 companies in our coverage universe have seen FY21E earnings downgrade of >10%.
• So far, we have cut FY20/FY21E Nifty EPS estimates by 2.7%/2.9% to INR472/INR485 from INR485/INR499. We are building in Nifty EPS growth of -2.4%/+2.7% for FY20/FY21E.

Piping hot news

Oil Rises on View That Demand May Rebound Beyond Pre-Virus Level

Oil rose as the head of the International Energy Agency forecast demand will likely grow past its level before the global pandemic. Futures in New York gained as much as 2.3% on Monday, with trading volumes thin due to holidays in the U.S., U.K. and Singapore. Fatih Birol, executive director of the IEA, said oil consumption hasn’t yet peaked, countering speculation that the virus will have a long-term impact. “In the absence of strong government policies, a sustained economic recovery and low oil prices are likely to take global oil demand back to where it was, and beyond,” Birol said in an interview.