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:

CRISIL Ratings: Agrochemicals sector to see 7-9% growth amid modest exports

SBI Capital Markets: RBI Monetary Policy Dec'24 - RBI faces arduous task of managing all dynamics: Liquidity, Currency, Growth and Inflation

SBICAPS Monthly Ecocapsule Dec'24 : FY25 - A TALE OF TWO HALVES OR ONE OF FULL DESPAIR? - Executive Summary

CRISIL Ratings: Revenue growth of organised luggage makers to halve to 8-10%

CRISIL Ratings - Cement demand to grow at a moderate pace of 7-8% this fiscal

CRISIL Ratings: For small finance banks, RoA to dip ~40 bps this fiscal

Securitisation volumes witness strong growth; likely to reach ~Rs. 60,000 crore in Q2 FY2025: ICRA

CRISIL Ratings: Operating losses of state discoms to stay high despite 15-20% dip

CRISIL Ratings: Tamil Nadu garment exporters to see 8-10% revenue growth

CRISIL MI&A: Inflated natural rubber prices to puncture tyre maker margins

Infrastructure bond issuances by public sector banks to drive banks' bond issuances to an all-time high in FY2025: ICRA

CRISIL Ratings: Apparel retailers to stitch 8-10% growth with festivals, fast fashion

CRISIL Ratings: For ARCs, rising power consumption to boost recoveries from stressed operational thermal plants

Views of ICAI on SA 600 vs ISA 600

CRISIL Ratings: Wagon makers set to roll in ~20% revenue growth this fiscal

CRISIL Ratings: Basmati industry to see revenue grow ~4% on a high base this fiscal

CRISIL: Pharmaceutical sector set for 8-10% revenue growth this fiscal

CRISIL Ratings: Flexible packaging players' credit profiles to stay subdued this fiscal

Industry credit expected to grow over 12 per cent: FICCI-IBA Bankers' Survey

CRISIL Ratings: Decadal-low duty to push gold jewellery retailers' revenues up by 22-25%

CRISIL Ratings: Education loan AUM of NBFCs to top Rs 60,000 crore this fiscal

Evolving asset quality risks to impact growth and profitability of microfinance: ICRA

Near-term Consolidation; Focus Remains on Style & Sector Rotation - Axis Securities

CRISIL Ratings: Paper packaging volume to grow, but profitability to plumb lows

CRISIL MI&A: Corporate revenue growth likely moderated to 5-7% in April-June, the slowest in 15 quarters

CRISIL Ratings: Revenue growth of auto dealers to enter the slow lane this fiscal

Declining liquidity coverage ratios to slow down credit growth for banks: ICRA

CRISIL Ratings: Road developers to see slower revenue growth of 5-7% next fiscal

CRISIL Ratings: Small finance banks to grow advances 25-27% this fiscal

Global monetary easing to pick up pace - Puneet Pal, Head-Fixed Income, PGIM India Mutual Fund

Kotak Institutional Equities: Strategy: 1QFY25: Converging trends

CRISIL Ratings: Cement makers line up ~Rs 1.25 lakh crore capex over fiscals 2025-27

CRISIL Ratings: Urea import dependency to fall to 10-15% from this fiscal

CRISIL Ratings: 20% ethanol blending goal means more sugarcane utilisation

Kotak Institutional Equities: Automobiles & Components: 1QFY25 review: Steady quarter; demand outlook weakening

CRISIL MI&A: Macroeconomics First Cut - Goods exports fall, services soften

Kotak Institutional Equities: Consumer: 1QFY25 review- Uptick in staples, continued weakness in discretionary

CRISIL Ratings: Despite cash disbursement restriction gold-loan NBFCs shine

SBICAPS Report - The Green Pill: Labelled Bond Issuances, ESG Indices, Global Sustainable Funds

We expect the 10 yr benchmark bond yield to keep drifting lower gradually - PGIM India Mutual Fund

Strategy: Faith, froth and fundamentals by Kotak Institutional Equities

Earnings growth should be the key driver of returns hereon - Vinay Paharia - CIO, PGIM India Mutual Fund

IT Services: ERD services: Auto pulse-challenges ahead - Kotak Institutional Equities

Banks, Diversified Financials : Strong on expected lines across BFSI - Quarterly Review - Kotak Institutional Equities

Metals & Mining: SC ruling-empowers the states; marginal negative impact - Kotak Institutional Equities

CRISIL Ratings: Revised deposit norms unlikely to be onerous for HFCs

CRISIL Ratings: 6 gigawatt renewable energy storage to be added by fiscal 2028

CRISIL Ratings: Thermal share in power generation to dip over 500 bps next fiscal

Indian bond market issuances exceeded $105 billion, $25 billion new equity issued in FY24 - Shri Pramod Rao, ED, SEBI

One third of Nifty 100 companies hire thousands of young talent on apna.co


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

disclaimer copyright © 2005 - 2020