SUMMARY
Deutsche Bank's analysis of fiscal first quarter earnings season shows profits for corporates well above estimates helped by a mix of FX gains, MTM gains on investments and higher other income.
NET INCOME (PROFIT AFTER TAX) SURPRISES
The Jun-qtr earnings season is more than midway through, and till date aggregate numbers under coverage have been broadly in line with estimates on Revenue and EBITDA (core earnings). However aggregate net income has come in 7% ahead of estiamtes on account of a favorable mix of FX gains/MAT credit entitlement (Cairn India), MTM gains on investments (Hindustan Zinc, Bank of India), dividend income from subsidiaries (L&T), lower interest costs (Sterlite) and higher other income (HUVR, Sterlite) across different companies. Positive surprises on net income have outnumbered negative surprises by a ratio of 62:38, while positive and negative surprises on EBITDA have been evenly distributed.
KEY TRENDS
(1) While Government owned public sector banks have been severely impacted by asset quality concerns, private sector banks have performed reasonably well.
(2) Pricing and mix have continued to improve for most car companies, even as margin has come under pressure due to rupee depreciation and SG&A costs.
(3) Oil companies have suffered from lower refining/petchem margins while the gas segment has been impacted from low volumes.
(4) Steel/Aluminium margins have been better than expected while copper producers has disappointed on TC/RC realizations.
(5) Cement realizations have been robust, rising by 12-14%.
(6) Capital goods continued to witness margin pressure and working capital stress.
(7) Utility companies have benefitted from better execution and better coal availability.
(8) Price competition has resumed in Telcos even as minutes of usage growth remain stable.
(9) INR depreciation of 17% yoy meaningfully supported numbers of IT and Pharma companies.
Source: Deutsche Bank Markets Research
Deutsche Bank's analysis of fiscal first quarter earnings season shows profits for corporates well above estimates helped by a mix of FX gains, MTM gains on investments and higher other income.
NET INCOME (PROFIT AFTER TAX) SURPRISES
The Jun-qtr earnings season is more than midway through, and till date aggregate numbers under coverage have been broadly in line with estimates on Revenue and EBITDA (core earnings). However aggregate net income has come in 7% ahead of estiamtes on account of a favorable mix of FX gains/MAT credit entitlement (Cairn India), MTM gains on investments (Hindustan Zinc, Bank of India), dividend income from subsidiaries (L&T), lower interest costs (Sterlite) and higher other income (HUVR, Sterlite) across different companies. Positive surprises on net income have outnumbered negative surprises by a ratio of 62:38, while positive and negative surprises on EBITDA have been evenly distributed.
KEY TRENDS
(1) While Government owned public sector banks have been severely impacted by asset quality concerns, private sector banks have performed reasonably well.
(2) Pricing and mix have continued to improve for most car companies, even as margin has come under pressure due to rupee depreciation and SG&A costs.
(3) Oil companies have suffered from lower refining/petchem margins while the gas segment has been impacted from low volumes.
(4) Steel/Aluminium margins have been better than expected while copper producers has disappointed on TC/RC realizations.
(5) Cement realizations have been robust, rising by 12-14%.
(6) Capital goods continued to witness margin pressure and working capital stress.
(7) Utility companies have benefitted from better execution and better coal availability.
(8) Price competition has resumed in Telcos even as minutes of usage growth remain stable.
(9) INR depreciation of 17% yoy meaningfully supported numbers of IT and Pharma companies.
Source: Deutsche Bank Markets Research
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