Analyst Research Report Snapshot

Title:

Spark Capital - 2QFY13 Results Preview

Price:

$403.00

Provider:

Spark Capital Advisors(India) Private Limited

Date:

10 Oct 2012

Pages:

36

Type:

AcrobatPDF

Companies referenced:

ABB.NS ABUJ.NS ACC.NS ADAN.NS AHLU.NS AIAE.NS AKZO.NS AMAR.NS APLO.NS APSE.NS ARBN.NS ASPN.NS AXBK.NS BACO.NS BAJA.NS BFRG.NS BGRE.NS BHEL.NS BION.NS BJEL.NS BLUS.NS BOB.NS BOI.NS BPCL.NS BRGR.NS BRLC.NS CADI.NS CAIL.NS CCON.NS CCRI.NS CESC.NS CHLA.NS CNBK.NS COLG.NS CORF.NS CRBK.NS CROM.NS CTBK.NS DABU.NS DBCL.NS DIVI.NS DSTV.NS ECLE.NS ESRS.NS EXID.NS FED.NS FISO.NS GAIL.NS GATE.NS GGAS.NS GJIP.NS GLEN.NS GLSM.NS GMRI.NS GOCP.NS GPPL.NS GSPT.NS GVKP.NS HAWY.NS HCLT.NS HDBK.NS HEXT.NS HPCL.NS HROM.NS HTML.NS HVEL.NS ICBK.NS ICCA.BO ICMN.NS IDFC.NS IGAS.NS ILFT.NS INBA.NS INBK.NS INED.NS INFY.NS IOBK.NS IOC.NS IPCA.NS IRBI.NS IVRC.NS JAGP.NS JAIR.NS JULS.NS JYOI.NS JYTS.NS KANE.NS KAPT.NS KARU.NS KECL.NS KTKM.NS KVRI.NS LICH.NS LTFH.NS MBFL.NS MELC.NS MINT.NS MMFS.NS MNFL.NS MOSS.NS MRTI.NS MSCM.NS MUTT.NS NABV.NS NCCL.NS NELG.NS NHPC.NS OILI.NS ONGC.NS PERS.NS PGRD.NS PIDI.NS PNBK.NS PTCI.NS PWFC.NS RURL.NS SATY.NS SBI.NS SHCM.NS SHCU.NS SIBK.NS SINF.NS SKFB.NS SRTR.NS SUTV.NS TAMO.NS TCS.NS TEML.NS THMX.NS TOPO.NS

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Summary:

Our coverage universe of 136 stocks is expected to report ~23% yoy earnings growth with ~250 bps operating margin expansion for 2QFY13, however earnings growth ex- O&G should be limited to ~16% yoy with flat operating margins. What are our key monitorables apart from the headline performance? Agri Inputs – On a YoY basis, complex fertilizer volumes are expected to see a drop on the back of higher price differential vis-à-vis urea, clearing out of channel inventory and delayed monsoons. Within complexes, traded fertilizers are expected to see higher volume growth, resulting in lower blended margins Automobiles – Weak quarter for most companies with OEMs posting qoq decline in revenues. Weaker product mix and lower volumes to drive sequential margin decline for OEMs (except Bajaj Auto which saw a recovery in export volumes). Apollo Tyres and Exide Industries to witness margin expansion driven by softening raw material prices. Cement – Expect robust results with realisations and margins are likely to improve on a y-o-y basis. Dispatches for the quarter are likely to grow by ~5% y-o-y. Cement prices have fallen less than usual during monsoon wherein realisation/t are expected to fall marginally by 1-2% q-o-q v/s declines of 4-6% historically Cap Goods – Growth in consumer centric companies is expected to remain strong while, constraints in order inflow and execution worries are expected to remain a concern for most capital goods and engineering companies Financials – We expect slippages for banks, esp. public sector banks to be lower qoq while incremental restructured assets to remain elevated as was the case in the previous quarter. Softening wholesale rates should result in improvement in margins especially for the Private banks and NBFCs. FMCG/ Media – FMCG companies to sustain strong earnings growth led by good volume growth and gross margin expansion on the back of softer raw material prices. Expect subdued earnings performance from Media & Entertainment companies primarily due to muted advertisement revenues Infrastructure – Mixed quarter for power companies as seasonality aides higher hydro generation while an acute gas-supply shortage crimps performance of gas-based power plants. Roads and airports to show flat performance, while ports likely to witness a healthy growth in volumes qoq. Oil & Gas – Gas utilities to witness muted volumes on declining KG supplies, albeit with stable margins. Expect 40% ($56/bbl) upstream subsidy share. Forex and Inventory losses to partly reverse for OMCs Pharma – We expect strong performances from most coverage companies aided by the weakness in rupee (average USD:INR of 55.2 for the quarter). Reported profits are expected to be boosted by reversal of MTM losses from the previous quarter (closing USD:INR of 52.7 vs. 55.8 in Q1FY13), particularly for Aurobindo, Glenmark, Ipca and Jubilant. IT – We believe yoy revenue growth would bottom out at 5-8% range this quarter and expect it improve. Expect current quarter sequential revenues to be in 2%-4% range. Key monitorables would be FY14 hiring plans and margins on the back of recent rupee appreciation. Rupee appreciation would impact profits due to debtor restatement.

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