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MOSL: Morning India (9/October/19): 1. India Strategy 2QFY20 (The wait gets longer!; Weak underlying demand delaying earnings recovery); 2. Titan Company

MOrning India (9/October/19): 1. India Strategy 2QFY20 (The wait gets longer!; Weak underlying demand delaying earnings recovery); 2. Titan Company

 

Today’s top research theme

India Strategy 2QFY20: The wait gets longer!; Weak underlying demand delaying earnings recovery

• The second-quarter earnings-report season will be more of the same - tepid and uneventful. Underlying demand slowdown in the domestic economy and weak global commodities prices are expected to take a toll on earnings with very few bright spots, if any. However, it is important to look at this quarter's numbers from a PBT perspective, as the reduction in the corporate tax rate cuts will result in several adjustments in this quarter's tax numbers (e.g. large corporate banks will make deferred tax adjustments).
• We expect MOFSL Universe's PBT to grow 2% YoY but PAT to decline 6% YoY, dragged by Automobiles and Metals. The difference between PBT and PAT is exaggerated because of the deferred tax adjustments in Financials. Ex-Financials, we expect MOFSL Universe's PBT/PAT to decline 14%/8% YoY. Private Banks, Consumer, Cement and Capital Goods, however, will provide some respite.
• Our FY20 Nifty EPS estimate has been cut by 3.8% to INR539 (prior: INR560). We now build in EPS growth of 12% for FY20. Ex-corporate banks, we expect 3% profit growth for the Nifty in FY20.

Piping hot news

Honda spreads 'big wing' to take on Royal Enfield

After two decades at the fringes, Japan's largest two wheeler maker's Indian subsidiary, Honda Motorcycle and Scooters India, aims to double down on the growing Indian premium motorcycle market and challenge Royal Enfield in the mid-size motorcycle space with a dedicated business division and new product portfolio in less than 18 months.