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Q1 results – More beats fewer misses thus far
Essence of the Week
Aug 01, 2016 | Source: AxisDirect
The GST bill is to be tabled in the Upper House of Parliament next week. Autos, FMCG (ex-ITC), Logistics, and Cement are the main eventual beneficiaries as the beneficial effects cascade down in a few years. However note that after the Parliament, >50% states need to pass it with 2/3rd majority.
With adoption of Ind-AS from this quarter, the results season has got extended to mid-September. Till Thursday ~ 50 companies from our universe declared results, of which we analyse below. The surprise ratio (vs. our estimates) has been the best of the past 2 years at 42%, while disappoint ratio was 26%. Autos, NBFCs, Cement and Telecom beat estimates, while ABB, HZL and Dr Reddys disappointed. Of the 130 BSE500 stocks which declared results, prices of 23% stocks gained >5% while only 18% saw a similar decline. The troughing out of earnings is thus now evident, while the pay commission awards and monsoons (Gujarat is also supposed to make up most of its deficit in August) augur well.
Due to Ind-AS, excise is now taken in expense and hence revenues and margins are not comparable YoY or QoQ. Overall, despite the above, margin growth shows up much more than revenue growth due to falling commodity prices. YoY growth for Earnings and EBITDA has been ~200 bps and ~300 bps above expectations at 13% and 10% respectively while revenue expectations have lagged (3% vs 6% estimated).
Sequential growth was also supposed to the best of the past 10 quarters as highlighted in our preview note, and thus far earnings for these 50 companies on a sequential basis have grown by 19% vs. a decline of 15% in the previous quarter..
Related Keyword
Bonds
Monetary Policy
Monsoon
India
GST bill
Banks
Indian Markets
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