"But, you see, the
theatre is not always art in America."
—Beatrice Wood (American,
1893-1998)
Word for the day
Benighted (adj)
Intellectually or morally
ignorant; Unenlightened
Malice towards none
कुछ भी
नहीं है,
बाक़ी बाज़ार चल रहा है\
ये कारोबार-ए-दुनिया,
बेकार चल रहा है\
बाक़ी बाज़ार चल रहा है\
ये कारोबार-ए-दुनिया,
बेकार चल रहा है\
—~सालिम
सलीम
First random thought this morning
BJP won Tripura elections on the promise of "rule of
law" and "good governance". An act of public outrage and destruction
of public property (even if it is Lenin statute, it is public property
constructed with people's money), with police acting mute spectator, is not an
inspiring beginning.
The debate in media is totally irrational and ridiculously
frivolous. Dragging Mahatma Gandhi and Bhagat Singh into this quagmire is
blasphemous.
The better course would have been to pass a resolution in Assembly
(BJP has 2/3rd majority), condemn Marx and Lenin and officially remove it.
Else, let people freely destroy all Mughal and British monuments!
What is bothering Indian markets - 2
In my view, the aggregate earnings growth estimates for FY19 and
FY20 are optimistic and may need moderation in coming months.
I believe that analysts are not fully factoring the impact of the
following in their estimates:
(a) Rise in financing cost.
(b) Persistently high
inflationary expectations and hence acceleration in wage cost.
(c) Higher compliance
cost, including higher incidence of tax and higher compensation for natural
resources.
(d) Further deterioration
in asset quality of banks and NBFCs as (i) paranoia hits compliance & audit
functions; and (ii) rise in lending rates impairs debt servicing capability of
more marginal borrowers.
(e) Extrapolating 3QFY18
earnings to FY19 and FY20 may not be appropriate as this quarter had a low yoy
(DeMo affected) and qoq (GST roll out impact) base. The aggregate 3Q growth
normalized for these two major disruptions, does not give much reason for being
ebullient, especially considering that the earnings have remained flat for past
three years.
I have read over 25 reports analyzing 3QFY18 results and
forecasting FY19 and FY20 earnings post these results. All analysts appear predetermined
to project a rather optimistic picture of FY19/FY20 earnings. They have
therefore tried to present 3Q analysis on selective basis, like Ex-financials,
Ex-SBI, Ex-energy, Ex-financials & OMCs etc.
I would though like to ignore this selection bias and consider the
aggregate numbers. On aggregate basis:
(i) Nifty top line
grew 13.4% (yoy) despite a low base affected by DeMo.
(ii) Nifty EBIDTA grew
by 8.8% below consensus estimates of over 11%.
(iii) Nifty PAT grew
7%, much below estimates of over 13%.
The consensus amongst analysts is forecasting ~25% EPS growth in
FY19 and another 18-19% growth in FY20. We have hardly seen any downgrades in
past 6months. On these basis one year forward PE of current Nifty level is
close to 17x, which is still higher than the long term average.
I feel before the dust settles on NPA issue, we may see another
round of business disruptions, as credit is squeezed and cost is hiked.
Having said this, I must highlight, it would be highly imprudent to ignore
the broad based earnings recovery and green shoots sprouting in various patches
of the economy. I therefore feel that investors should stay alert and keep
exploring opportunities burgeoning in pockets.
(Source: MoSl, Credit Suisse)
No comments:
Post a Comment