Q2FY19: Earnings Downgrade Continue

Q2FY19: Earnings Downgrade Continue

Nifty top-line grew by 19% Y-o-Y while Bottom-line grew by 7% Y-o-Y. Nifty sales growth remained flat as pressure on volumes due to delayed festive demand and Kerala floods offset the positive impact of Oil & Gas and Metals sectors. Rising operating costs such as fuel, freight and packaging costs weighed on margins  and profitability. Continued INR depreciation and interest rate rise also impacted earnings. Strong realisation led earnings growth was seen in Oil & Gas and basic materials, as input cost pressure haven’t caught up to realisation growth in these sectors. H1 Nifty EPS (continuing operations) now stands at 463 (TTM). Nifty earnings estimates have been cut 11% from the beginning of FY19 to date. We expect FY19 Nifty EPS to be 514 while FY20 is expected to be 591.

Key highlights 
  • Our coverage universe beat Nifty earnings growth with 18% Y-o-Y while being less than Nifty revenue growth on a equi weighted basis.
  • Weak volume growth coupled with input cost pressure are also impacting our top-line growth and EBITDA margins. Profitability went down mainly because of one-off factors.
  • However, earnings growth is rising on the back of BFSI, chemicals and metals segment in our coverage.
  • There were more beats than misses in our coverage.

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