Analyst Research Report Snapshot

Title:

Spark Capital: Spark Capital: Mar-13 Preview

Price:

$391.00

Provider:

Spark Capital Advisors(India) Private Limited

Date:

10 Apr 2013

Pages:

35

Type:

AcrobatPDF

Companies referenced:

ABB.NS ABUJ.NS ACC.NS ADAN.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 CCRI.NS CESC.NS CHLA.NS CNBK.NS COLG.NS CRBK.NS CROM.NS CTBK.NS DABU.NS DALA.NS DBCL.NS DIVI.NS DSTV.NS ECLE.NS EXID.NS FED.NS GAIL.NS GATE.NS GGAS.NS GLEN.NS GLSM.NS GOCP.NS GPPL.NS GSPT.NS HAWY.NS HCLT.NS HDBK.NS HDFC.NS HEXT.NS HLL.NS HPCL.NS HROM.NS HTML.NS HVEL.NS ICBK.NS ICMN.NS IDFC.NS IGAS.NS INBA.NS INBK.NS INED.NS INFE.NS INFY.NS IOBK.NS IOC.NS IPCA.NS IRBI.NS ITC.NS IVRC.NS JAGP.NS JULS.NS JYOI.NS KANE.NS KAPT.NS KARU.NS KECL.NS KTKM.NS LAIN.NS LICH.NS LUPN.NS MAHM.NS MINT.NS MMFS.NS MNFL.NS MOSS.NS MRCO.NS MRTI.NS MSCM.NS MUTT.NS NABV.NS NCCL.NS NHPC.NS OILI.NS ONGC.NS PERS.NS PGRD.NS PIDI.NS PLNG.NS PNBK.NS PTCI.NS PWFC.NS RURL.NS SATY.NS SBI.NS SHCM.NS SIBK.NS SINF.NS SKFB.NS SRTR.NS STAR.NS SUTV.NS TAMO.NS TCS.NS TEML.NS TOPO.NS TORP.NS TVSM.NS ULTC.NS UNBK.NS VATE.NS VYSA.NS WABC.NS WIPR.NS Y

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Summary:

Our coverage universe of 133 stocks is expected to report ~10.3% yoy revenue growth with ~50 bps operating margin expansion in 4QFY13, however revenue growth ex- O&G should be lower at ~6.8% yoy with operating margin contracting by ~55bps yoy. Led by currency depreciation IT & Pharma sectors are expected to lead top line growth (20%+ yoy), while Auto, Capital Goods and Power sectors are expected to report muted top line growth (< 5% yoy) What are our key monitorables apart from the headline performance? Automobiles – Poor volume growth to drive weak volumes for most OEMs. Wabco and Bharat Forge to post sharp revenue declines due to CV exposure, while battery makers are expected to post revenue growth driven by the automotive replacement market. Sequential margin expansion seen for Eicher driven by Royal Enfield and for Exide driven by lead cost pass-through. Cement – With demand moderation due to tough macro-environment and a slowdown in government expenditures, our coverage universe volume growth is expected to remain flat with no major pricing growth. We estimate Q4FY13 earnings to decline on a y-o-y basis on lower volumes and margin contraction of 54-602bp (leading to lower EBITDA/t) given muted pricing and higher freight costs. Cap Goods – Order inflow is expected to remain restrictive for most capital goods and construction companies as traction from infrastructure and industries remain muted. Margins and working capital situation are also expected to be stretched due to delays in execution. Growth in consumer durables is expected to remain robust on the back of strong demand Financials – Expect seasonality in 4Q recoveries to be impacted as a consequence of delayed government spending; removal of loans performing as standard for >2yrs from the restructured portfolio to offset incremental restructuring. Slippages and asset quality stresses to remain elevated for PSU banks, treasury income contribution to be high for banks with larger AFS proportions and m.durations. Expect stable NIMs, asset quality for the private sector pack . FMCG - Earnings growth to be driven by relatively moderate volume growth and better yoy gross margins. Media - Expect decent earnings growth for media and entertainment companies. Relatively better quarter on advertising revenue growth partially due to a low base. Higher subscription revenues should further help Broadcasters and distribution platforms. Benign newsprint price to aid earnings growth for Print media companies. Infrastructure/ Power – Gas based power plants to witness all time low PLFs due to low supply from Reliance’s KG D6 – negative for Torrent Power and Lanco Infratech; NHPC to witness a subdued quarter due to seasonality; un-remunerative PPA tariffs and low domestic coal supply a negative, particularly for Adani Power; PTC India and Nava Bharat Ventures will likely benefit from a buoyant merchant market and low imported coal prices; port and road developers will witness a flattish qoq performance Oil & Gas – Gas utilities to witness fall in earnings amidst declining KG supplies. Expect 4Q under recoveries of Rs. 380bn and 39.5% ($56/bbl) upstream subsidy share. Weak volumes to entail qoq dip in Upstream earnings; Expect OMCs to report huge qtrly profits (not comparable) due to lumpy GOI compensation of Rs. 476bn Pharma – We expect strong export sales aided by yoy depreciation in rupee (8%) to offset weak domestic formulations growth (as indicated by secondary sales data). Marg...

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