>INDIA STRATEGY (MORGAN STANLEY)

QE Jun-09 Earnings Season Thus Far

■ Quick Comment – Earnings Better than MS Analysts’ Expectations: So far, 38 companies in our coverage universe have reported results. Aggregate earnings are up 3% YoY (ex-energy up 22%) against our analysts' expectation of 4% fall (ex-energy up 14%). In terms of surprise breadth, 21 of these 38 companies have reported net profit that exceeded expectations by 5% or more, while 10 trailed our expectations by 5% or less (see page 2 for details by company. Fifteen companies in the BSE Sensex have reported flat earnings ahead of MS analysts’ expectations of 8% fall. Ex-energy, aggregate earnings for Sensex companies is up 23% against MS analysts’ expectations of 13% growth. At the sector level, consumer discretionary and materials are the key positive surprises. Healthcare is the best-performing sector in terms of profit growth, followed by financials while materials is the worst-performing sector thus far.

■ EBITDA Margins Rise: EBITDA margins for the sample are up 2.6ppt. Excluding the energy sector, EBITDA margins are up 2.3ppt. Five sectors have seen margin expansion with financials leading the list. Revenuegrowth for the sample is down 1% YoY (ex-energy, up
16%) whereas for the Sensex companies, it is down 5% (ex-energy, up 16%).

■ Broader Market Earnings Lead the Narrow Market: So far, 629 companies (accounting for almost 50% of India’s market capitalization) have reported. Revenue growth for the broad market is flat, while ex-energy revenue is up 11%. Aggregate earnings for the broad market are up 9% YoY (up 16% ex-energy). Of these 629 companies, 17% or 107 reported losses for the
quarter while 25% or 160 companies have reported earnings growth in excess of 50% for the quarter ended June 2009.

To see full report: INDIA STRATEGY