Earning estimates for Dec' 10 quarter results:P Lilladher

Prabhudas Lilladher has come out with report on earning estimates for Dec' 10 Quarters. According to the research firm, corporate earnings performance for Q3FY11 is expected to be good in terms of revenues but slightly lower in terms of profits due to lower margins.

Strong revenue growth, but slight margin squeeze: Revenue for Nifty companies (ex. Oil & Gas) is expected to grow by 22.0% YoY, while PAT is expected to grow by 14.2% YoY. EBITDA margins will fall by 63bps YoY. The margin decline is not surprising due to higher commodity prices. PAT is also expected to be somewhat depressed due to higher interest costs. Capital Goods, Construction & Cement lead, while Autos & Fin. Services lag overall earnings: Partly due to seasonal factors and partly due to better execution, we expect significantly improved quarterly performance from Capital Goods and Construction companies. Driven by higher prices, Cement companies are also expected to report better QoQ earning growth. Earnings expected to grow at a 19.6% CAGR over FY11-13E: Nifty earnings in FY11 are likely to grow by 19.2%. We expect this solid performance to largely continue over the next couple of years as well. Earnings will grow by 21.9% in FY12E and 17.4% in FY13E, implying a CAGR of 19.6%. Reduction in earnings growth in FY13E is essentially on account of lower expectations from commodity sectors. Ex. Commodities Nifty earnings are expected to grow at a steady 20% pace. Targeting Nifty at 7000 by end of the year: Despite macro negatives in India (high inflation, lack of reforms, fluctuating IIP, etc.) and globally (especially in peripheral Europe), we believe the strongest argument in India's favour is its earnings growth. Even assuming no significant re-rating, we believe Nifty would be at 7000 by the end of the year, simply led by solid earnings performance. The high earnings growth sectors are likely to be Capital Goods, Technology & Banks. Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own, and not that of the website or its management.Moneycontrol.com advises users to check with certified experts before taking any investment decisions. To read the full report click on the attachment

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