>India Strategy: Dec-09 Results Review (MOTILAL OSWAL)

A)Aggregate performance in line with estimates
■ 109 companies in our Universe have reportedresults for the Dec-2009 quarter. Sales are up 25% (vs estof22%), EBIDTAup 34% (vs est31%) and PAT up 26% (vs est 26%).

■ 47 companies in our Universe reported PAT higher than estimate while41 have reported below. On the EBIDTA front,42 companies reported above estimate while31 were below.

B) Sector performance: Telecom above estimates; Oil & Gas, Pharma, Utilities below estimates
■ Autos, Telecom, Metals and Real Estate performed better than estimates.

■ Sectors where PAT growth is disappointing includeOil & Gas (16% growth vs est 100%, led by ONGC & RMs), Pharma (entirely led by Dr Reddy’s), and Utilities (2% growth vs est of 8%).

C) Sensex performance: ONGC drags down aggregates
■ The aggregate performance of Sensex has beenin line (29 Sensex companieshave reportedDec-09 quarter results).

■ Sensex PAT aggregate is in line, with growth of18% vs estimateof 22%. EBIDTA growth is 29% vs estimated27%. Sensex performance has been dragged down by ONGC’sunexpectedly high write-off for dry wells. Excluding ONGC, Sensex PAT growth is 17% vs estimated 15%.

■ 10 companies reported PAT above estimates while10 reported below estimates.

D) Best and worst performing companies
■ Several large-cap companies reported significantly better than our estimates:Maruti(222% PAT growth vs est of 171%),Jaiprakash(49% PAT growth vs est of19%),Grasim(81% PAT growth vs est 69%), TCS(33% PAT growth vs est 21%) and Bharti Airtel(2% PAT growth vs 12% decline). Few others with strong performance are BoB, Idea, Asian Paints, Crompton, Shree Cements and Zee.

■ Large-caps that reported below estimates wereONGC, HUL, L&T, SBI, Dr Reddy’sand Tata Power. Other disappointments were from HCC, IVRCL, Tech Mahindra, UltraTech and Sintex.


Key sectoral highlights
■ AUTOS: Two-wheelers segment profits were in line with estimates. Outperformanceof Maruti and Tata Motors was dragged down by M&M, leading to sector aggregatePAT in line. Maruti’smargins expanded 240bps QoQ while M&M’s margins fell 190bps.

■ BANKS: Banking sector PAT performance was in line. Of the large banks,Canara Bank and Bank of Baroda outperformed significantly, whereas Bank of India and State Bank underperformed. Sequentially, core operating profits improved across banks as the contribution from NII increased and trading profits declined.Private banks continued to improve on their cost income ratios.

■ CEMENT: Surprise volume growth of 9.4% YoY was offset by Rs15/bag QoQ price decline. Overall sector PAT performance was in line. Indian Cements and Ultratechunderperformed estimates whereas Shree Cement and Grasim outperformed.

■ ENGINEERING: Sector turnover growth at 5% was one of the lowest ever, and significantly below estimate of 19%. However, EBITDA and PAT were in line driven by superior margins led by lower commodity prices. Siemens hugely outperformed estimates followedby Crompton; L&T and Thermaxunderperformed.

■ FMCG: Volume growth remained robust in 3QFY10; however, impact of carry-over pricing waned. Estimates were in line at all levels, Sales, EBITDA and PAT. Asian Paints, Colgate and Daburoutperformed estimates, while GSK Consumer, Britannia and HUL were the major underperformers.

To read the full report: INDIA STRATEGY