>INDIA STRATEGY (MORGAN STANLEY)

QE Mar-09 Earnings Season Thus Far

Quick Comment – Aggregate Earnings Growth Falls: Through today, 55 companies in our coverage universe have reported results. Aggregate earnings fell 3.2% YoY against our analysts' expectation of a 7% fall YoY. In terms of surprise breadth, for 53%, or 29, companies’ net profits exceeded expectations by 5% or more, while 16 companies reported results that trailed our analyst expectations by 5% or less. So far, three companies from our coverage have reported losses. Eighteen companies in the BSE Sensex have reported thus far, with aggregate earnings down 11% YoY, compared with our MS analysts’ expectations of a 7% fall. Excluding the energy sector, the Sensex earnings are down 14%, below MS expectations. At the sector level, industrials and consumer staples are the key positive surprises. Consumer Staples is the bestperforming sector in terms of profit growth, followed by Technology, while Materials is the worst-performing sector. Excluding the Financials sector, aggregate net profit for this sample is down 3.2%.

EBITDA Margins Slip: EBITDA margins for the sample are down 50bp YoY, while excluding Energy they are down 2.8ppt. Six sectors have reported a compression in EBITDA margins, with Materials leading the list. Notably, revenue growth for the 55 companies that have reported is 3% while for the 18 Sensex companies it is down 8%.

Broader market earnings; Worse than the narrow market: So far, 1,571 companies have reported. While revenue is up 1.6% YoY, net profit is down 11% YoY. Excluding the banks, aggregate profits are down 21%. EBITDA margins are down 75bp YoY, to 25%. Of these 1,571 companies, 34%, or 527 companies, have reported losses for the quarter ended March 2009.

To see full report: INDIA STRATEGY