Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us  
Google
Web www.equitybulls.com
Research

| More

India Equity Strategy - Quarterly flipbook: Q4FY22-Cost inflation driving downgrades

Posted On: 2022-06-11 13:51:57 (Time Zone: IST)


Varun Lohchab, Institutional Research Analyst, HDFC Securities.

Q4FY22 earnings season saw an overall in-line performance with wide divergences across sectors and companies. Aggregate revenue/PAT grew by 26%/22% YoY across the HSIE coverage universe (~200 stocks), while they had a three-year CAGR of 11.2%/17.1%. Our coverage universe saw strong YoY growth in the segments of energy, metals, chemicals, lending financials and real estate while infrastructure and cement sectors disappointed. IT continued its steady growth. Common theme across management commentaries was their attempts towards price hikes to counter elevated commodity inflation and freight costs. Various industry players found it challenging to execute it adequately without disturbing demand except few auto & chemical companies.

~54% of our coverage stocks have beaten earnings estimates (vs. ~48% in Q3FY22). Overall, inline performance of the coverage universe with a slight miss of 0.7% was led by energy and infra. Given steep cost inflation expected in 1HFY23, most of the sectors witnessed earning cuts led by energy, IT, industrials, banks and consumers. Consequently, overall earnings estimates witnessed cuts of 4.3% and 4.1% in FY23 & FY24 respectively. For the HSIE coverage universe, both FY23 & FY24 projected earnings growth stands at 13.3% incorporating momentum normalisation & steep cost rise after robust earnings growth in previous two years. Further, Nifty consensus FY23 EPS remains largely unchanged (we see downside risks to this in 1HFY23) and it is trading at ~18.7x FY23 EPS and ~16.1x FY24 EPS.

Sector highlights: Large banks witnessed strong recovery in asset quality and reduced credit cost which made them confident enough to accelerate lending. After a sharp uptick, IT sector growth is reverting to medium term base line. Staple producers felt pinch of inflation as volume growth decelerated and rural was yet to pick up. Price hikes were inadequate to counter inflation. Apparel bounced back to pre-covid level and profitability restored due to price increase and higher full price sales. Footfalls in malls are healthy and spend ticket size has increased. Paints delivered growth in spite of price hikes but jewellery and footwear struggled as cost pass through impacted demand. Chemical producers reported healthy revenue growth and adequate pass through of raw material cost increase. Rise in imported coal price and lower domestic supply created power deficit situation and merchant prices rose. Infrastructure sector enjoyed tailwinds and healthy order book given government's focus on infra projects. Elevated input prices spoiled the party though as risks of margin compression and projects getting delayed rose. Strong pre-sales growth and higher collections witnessed in realty sector which also could absorb partial price hikes. Upstream oil & gas companies reaped the benefits of higher crude & domestic gas realisation and boosted corporate profit pool of India in a meaningful way. After a hiatus, auto sector looked up led by demand pull. Cement producers couldn't push through adequate price hike on concerns of demand derailment.

Our preferred sectors continue to be large cap banks and IT, industrial & real estate, power, autos, gas, insurance, and capital markets, while we remain underweight on consumer (staples & discretionary), NBFCs, and small banks. Model portfolio: We maintain bias towards economy-facing and value sectors.


Click here to send ur comments or to feedback@equitybulls.com

Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.





Other Headlines:

Corporate bond market to more than double by fiscal 2030 - CRISIL

Gas Utilities : Gas consumption at record highs, growth now to trickle - Kotak Institutional Equities

Emkay and Geojit increase target prices of LIC, expect over 20% upside

CRISIL Ratings: Mall area to rise by 35% over the medium term on retail surge

Crop & Chemical Dashboard: Bottom is near, recovery unclear - Kotak Institutional Equities

Loan sell-downs of personal loan pools may see a temporary pause following the RBI's decision to increase risk weights: ICRA

India Surges Ahead in 5G Deployment, Paving the Way for a High-Tech Future!

CRISIL Ratings: Construction equipment revenue to grow 14-15% this fiscal

India to contribute 22% to the Global ER&D sourcing market by FY30: BCG-nasscom Report

CRISIL Ratings: In a decadal first, revenue of agrochemicals makers to slip ~3% on tepid demand this fiscal

CRISIL Ratings: Flexible packaging industry stares at decadal low profitability as oversupply stings

CRISIL Ratings: Domestic demand, softer cotton prices to sustain RMG growth

CRISIL Ratings: Higher workplace occupancy to light up cigarette volume 7-9%

CRISIL Ratings: Apparel retailers to grow 7-8% this fiscal via expansion, festival spur

CRISIL Ratings: For tea companies, ~8% revenue degrowth brewing this fiscal

CRISIL Ratings: Revenue of paper makers to crumple 8-10% this fiscal

ICRA expects banking sector to stay resilient, outlook remains Positive

CRISIL MI&A: Red-hot domestic demand to stave off steel price melt this fiscal

CRISIL Ratings: Replacement demand to drive tyre volume up 6-8% this fiscal

CRISIL Ratings: Home textiles makers to weave revenue, profitability rebound this fiscal

Capital outlay on roads, renewables seen rising ~35% in this and next fiscals to Rs ~13 lakh cr, backed by strong execution pace

Softening demand to moderate Indian IT services industry growth to 3-5% in FY2024: ICRA

CRISIL Ratings: Telcos may dial up Ebitda 15-17% to Rs 1.2 lakh crore this fiscal

CRISIL Ratings: Social welfare spend of states to hit a decadal high this fiscal

CRISIL Ratings: Footwear sector revenue to tread ~11% higher this fiscal

CRISIL Ratings: Robust demand to whip up dairy industry revenue 14-16%

Indian hospital industry's operating profit margin will remain healthy at over 22% in FY2024: ICRA

Weak overseas demand to snip 5-6% off jute revenue this fiscal - CRISIL

ICRA expects the telecom services industry to report moderate revenue growth of around 7-9% in FY2024 amid high capex spends

CRISIL - Viscose staple yarn makers set for 10-12% revenue growth this fiscal

Sugar mills seen unscathed despite pricier cane, lower exports - CRISIL

CRISIL Ratings: Specialty chemicals on domestic drive, revenue seen growing 6-7%

CRISIL Ratings: Higher ad spends to lift revenue 13-15% for print media this fiscal

Paytm: Top brokerages, such as ICICI Securities, Axis, Dolat lift Paytm's target price to Rs. 1250

CRISIL Ratings: Securitisation volume surges 60% to first-quarter peak

CRISIL Ratings: FMCG sector to witness 7-9% rise in revenue this fiscal

CRISIL MI&A and ATMA: Tyre industry on a roll, driving towards doubling in size

CRISIL Ratings: Slowing US, EU to chip 6-8% away from handicraft sales this fiscal

CRISIL MI&A: One out of five MSMEs to see stretch in working capital days

Yes Securities Identifies Rural India as Key Driver of Economic Recovery in Latest Report

CRISIL Ratings: Revenue of automotive component makers to grow 10-12% this fiscal

CRISIL: Residential real estate sales to grow 8-10% this fiscal

CRISIL MI&A: Cement prices to dip 1-3% this fiscal despite healthy demand

CRISIL Ratings: Aircraft MRO services revenue could leap 3x in 5 fiscals

Demand pressures to moderate revenue growth of Indian fashion retail entities to 10% in FY2024: ICRA

CRISIL Ratings: Revenue of organised gold jewellers to rise 16-18% this fiscal

CRISIL Ratings: Revenue of top 18 states to grow at 6-8% this fiscal

Automobile Sector - Monthly Quick View - May'23 - Steady YoY and MoM Growth on Low Base; UVs are Clear Winner...

CRISIL Ratings: New guidelines lend much-needed clarity to FLDG usage

MSP for kharif crops - Views of Pushan Sharma, Director - Research, CRISIL Market Intelligence and Analytics


Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2020