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The September quarter earnings season was broadly in line with expectations as far as the Nifty earnings are concerned.
In a broader sense, September quarter earnings were largely led by the commodity sector, with metals and oil & gas accounting for more than 72 percent of incremental earnings growth, Motilal Oswal said in a report.
The MOSL Universe numbers missed our expectations, entirely attributed to disappointments from PSU banks and telecom sectors. As many as 73 companies saw earnings cut of over 3 percent, while 38 companies saw upgrades of over 3 percent.
MOSL’s FY19/20 Nifty EPS estimates have been cut by 4.4/2.9% to Rs 515/655 v/s Rs 539/674 earlier. The brokerage firm expects Nifty EPS to increase 13.1 percent in FY19. And, nearly 70 percent of the earnings cut is driven by Tata Motors, IOC, Reliance Industries and ONGC.
The stock which saw earnings upgrades include Axis Bank, Bajaj Finance, and Hindalco. On the other hand, stocks which were downgraded include Tata Motors, UltraTech Cements, IndusInd Bank and Cipla which saw EPS downgrades of 78.9%, 22%, 17.7% and 16.8%, respectively.
Here is a list of top 10 stocks which Motilal Oswal handpicked post Q2 results:
ICICI Bank reported a strong quarter under the new management, as fresh slippages were in control and gross stressed assets/watchlist declined sharply.
The net earnings improved sharply led by better margins and steady loan growth. The provisioning coverage ratio continued increasing (+330bp QoQ).
The net earnings came in better than expected led by steady revenue growth and controlled opex. The net interest margin (NIM) expanded 7 bps on a QoQ basis to 3.4 percent and the management guided for an improvement in the NIM as MCLR re-pricing happens.
The asset quality improved as fresh slippages subsided. Assets under the BB quality and below pool declined by 15 percent on a QoQ basis to Rs 88.6 bn, resulting in a decline in the bank’s net stressed loans.
Watch-list including SMA1 and 2 declined to Rs 204 bn which constitutes less than 1 percent of the total loans. The corporate slippages declined, but non-corporate slippages stood higher.
SBI holds 70 percent provision on NCLT exposure and is expecting significant write-backs (INR60b from NCLT-1).
The revenues grew by 2 percent on a YoY basis to Rs 222.3 bn (in-line), led by a 3.7 percent increase in realizations to Rs 458.6k, while volume declined 1.5 percent on a YoY basis.
The EBITDA margin shrank by 240bp YoY to 14.5 percent, with the impact of higher discounts (+80bp QoQ) being offset by mix improvement. Adj. PAT declined ~15 percent YoY to Rs 21 bn
Total AUM grew 17 percent YoY (+3% QoQ) to Rs 4.3 trillion, with corporate AUM growth at 13 percent YoY. GNPA ratio declined 5 bps QoQ to 1.13 percent, driven by a 14 bps QoQ fall in corporate GNPLs to 2.18 percent.
During the quarter, one large corporate account of INR9b was partially recovered with <20% write off. The company has made prudent provisioning of Rs 270 crore during the quarter (30% of one-off gains on HDFC AMC stake sale of Rs 890 crore).
Despite the challenging base, Titan continued reporting strong top-line growth in Jewelry (segmental sales up 29%, aided by strong 32% SSSG, 24% volume growth), while margins came in lower than our estimate, largely due to one-offs.
The management commentary indicated that the outlook for Jewelry remains buoyant. Recovery in Watches revenues and margins continued at a healthy pace.
The revenue growth came in healthy at Rs 321 bn. The key segments driving growth were Hydrocarbon (+38% YoY), Infrastructure (+22% YoY), IT (+32% YoY) and Finance (+35% YoY). EBITDA stood at Rs 37.8 bn (+27% YoY) and margin at 11.8 percent.
EBITDA beat was driven by higher E&C margins (8.5% v/s estimate 8%), IT/TS and Others segment. The management maintained its FY19 guidance of sales growth of over 12-15% YoY, orders growth of 10-12 percent and EBITDA margin improvement of 25bp.
The marketing margin improved by 39 percent on a YoY basis, despite a weaker core GRM of USD3.5/bbl. The Petrochem EBITDA improved 51 percent YoY. PAT was further boosted by inventory gain of Rs 44 bn.
Operating performance was strong, though there was some seasonal compression in the steel margins, both in India and Oman. The impact, however, was offset by improved profitability at overseas mines (e.g. Mozambique) and reversal of INR1b provision at Australia.
Revenue growth was supported by healthy growth in the domestic business (+35% YoY). Operating profit increased 50 percent on a YoY basis to Rs 2.5 bn, with the margin improving 240bp YoY to 16.9 percent.
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