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India 1Q Earnings Preview Summary

Core Content

This document provides an analysis of the first quarter (1Q) earnings outlook for various sectors in India, including the overall market, consumer, private banks, telecom, media, infrastructure, property, mining and metals, and auto sectors. It highlights the expected performance of individual companies and the broader economic factors influencing the market.

Main Points

Overall Market Outlook

• 1Q Earnings Estimate: Earnings for the 70 stocks in the universe are expected to decline by 2.6% YoY but increase by 2.8% QoQ.
• Excluding Metals: Earnings are projected to rise by 3.5% YoY.
• Consensus Expectations: The market consensus is higher, with a 9.7% YoY and 9% QoQ growth.
• Market Recommendation: Maintain Overweight on the market with a NIFTY target of 9,540, at 15x FY17 P/E.
• Earnings Skew: Earnings growth is expected to be skewed towards the second half of FY16.
• Catalysts: Improving economy, expected approval of land and GST bills, normal monsoon, and possible rate cuts are anticipated to drive market performance.

Sector Performance

Consumer Sector

• Earnings Growth: Expected to grow 14% YoY.
• Key Outperformers:
  • Godrej Consumer Products: 36% YoY increase.
  • Kansai Nerolac Paints: 34% YoY increase.
• EBIT Margin: Improved by 118bps YoY and 27bps QoY.
• Consumer Trends: Benefited from cheaper crude-related inputs and strong marketing efforts.

Private Banks

• Earnings Growth: Expected to rise by 14-17% YoY.
• Key Outperformers:
  • LVB: 22-25% YoY increase.
  • IIB: 22-25% YoY increase.
  • YES: 22-25% YoY increase.
• Catalysts: Strong loan growth, healthy asset quality, and potential equity raisings.

Telecom Sector

• Earnings Growth: Expected to rise 16.7% YoY.
• Key Outperformers:
  • Idea: 30% YoY increase.
  • Data Revenue: Almost doubled from a low base.
• Challenges: Subscriber additions and data revenue growth are key drivers.

Media Sector

• Earnings Growth: Expected to grow 120% YoY, which is one of the highest in the universe.
• Catalysts: Strong box office performance due to low-budget movie success.

Infrastructure Sector

• Earnings Growth: Expected to rise 3.2% YoY.
• Key Outperformers:
  • SOTL: 79.5% YoY increase in revenue.
  • BJE: 15.4% YoY increase in sales.
• Challenges: Execution delays, lower construction income, and weak performance in some units.

Property Sector

• Earnings Growth: Expected to rise 12.2% YoY.
• Key Outperformers:
  • OBER: 45.7% YoY increase in sales.
  • PVKP: 15% YoY increase in sales.
• Catalysts: Asset sales, monetisation, and project completions.

Mining and Metals Sector

• Earnings Growth: Expected to decline -88.5% YoY.
• Key Underperformers:
  • SAIL: -15.3% YoY increase in sales.
  • VEDL: -21.9% YoY increase in EBIT.
  • TATA: -18.9% YoY increase in sales.
• Challenges: Declining metal prices, lower production, and weak demand.

Auto Sector

• Earnings Growth: Expected to decline -4.9% YoY.
• Key Outperformers:
  • BJAJ Auto: Sharp YoY jump in earnings.
  • Maruti Suzuki: Strong performance in the sector.
• Catalysts: New SUV launches, normal monsoon, and improved product mix.

Key Information

• Top Picks: Bajaj Auto, Idea, Sterlite Technologies, Eros International, and Bajaj Electricals are highlighted as top picks.
• Market Catalysts: Expected improvements in the economy, policy changes, and normal monsoon are seen as positive drivers.
• Sector Trends: Consumer, private banks, telecom, and media are expected to outperform, while metals, cement, state-owned banks, and oil & gas will show weakness.
• Earnings Estimates: The document provides detailed earnings estimates for various metrics (Sales, EBIT, PAT) for each company and sector.

Analysts

• Jigar Shah: (91) 226623 2632 | jigar@maybank-ke.co.in
• Abhijeet Kundu: (91) 22 6623 2628 | Abhijeet@maybank-ke.co.in
• Vishal Modi: (91) 226623 2607 | vishal@maybank-ke.co.in
• Neerav Dalal: (91) 22 6623 2606 | neerav@maybank-ke.co.in
• Anubhav Gupta: (91) 226623 2605 | anubhav@maybank-ke.co.in

Summary Table

Additional Notes

• The document includes detailed tables for each sector showing performance metrics, growth rates, and remarks.
• The NIFTY target is set at 9,540, with a 15x FY17 P/E.
• The overall market is maintained at Overweight due to the expected improvement in the economy.