Thursday 19 January 2012
Q3 results on 20 Jan 2012 Analysts` estimates for RIL, Axis Bank, ITC, Wipro, JSW Steel
Reliance Industries (RIL), Axis Bank, ITC, Wipro and JSW Steel will be announcing its third quarter financial results on Friday, January 20. We have collated views of analysts on how they see earnings for these companies. The same is as follows:
Reliance Industries (RIL)
Prabhudas Lilladher
On the back of declining GRMS during the quarter, RIL is likely to report weak set of numbers. Benchmark Singapore GRMs have averaged at USD 7.9/bbl. We expect GRMS of USD 7.0/bbl for RIL during the quarter. Weakness in the Dubai-AH spreads is likely to adversely impact the spreads over benchmark GRMs. Rupee depreciation and higher other income are likely to help matters during the quarter.
Motilal Oswal
We expect RIL to report 3QFY12 GRM of USD7.7/bbl v/s USD10.1/bbl in 2QFY12. Petchem EBIT is expected to be lower QoQ despite decent margin performance due to subdued volumes (2QFY12 volumes were up 21% QoQ). We expect 3QFY12 KG-D6 gas volume of 41mmscmd v/s 45.3mmscmd in 2QFY12. We expect RIL to report PAT of Rs 49.5 billion (down 13.1% QoQ and 3.6% YoY). The muted performance for the quarter is largely on account of lower GRM, lower petchem volumes and decline in KG-D6 production, partially compensated by 10% rupee depreciation. Also, in E&P segment, RIL`s lower share of 60% for full 3 months in 3QFY12 v/s only for one month (September) in 2QFY12. Key things to watch out for: (a) GRM, (b) Petchem margin, (c) KG-D6 production. RIL trades at 10x FY13E adjusted EPS of Rs 75.4. We maintain Neutral due to concerns on cash utilization, RoE reaching sub-15%, and increased share (80%) of cyclical refining and petchem businesses to the earnings.
Axis Bank
Prabhudas Lilladher
We expect loan growth of 6% QoQ in Q3FY12 and with 2% contraction in H1FY12. We see risks to our 21% loan growth assumption for FY12, though seasonality in loan growth is stronger for Axis in H2. We expect margins to moderate by 15bps in Q3FY12. Slippages have inched up in Q2FY12 and given the high share of SME credit, we expect moderate inch up in slippages from Q2FY12. However, due to lower investment depreciation, we expect provisions to trend down. Overall, we expect 13% PAT growth in Q3FY12.
Motilal Oswal
We expect AXSB to post higher-than-industry growth, with loan growth of 22% YoY and 8% QoQ. Sequentially, we expect deposit growth to be in line with loan growth. However, on a YoY basis, deposit growth is likely to be strong at 34%+. In 2QFY12, the bank had reported a sharp increase of 50bp QoQ in NIM, led by increase in loan yields and cooling bulk deposit rates. We expect margins to moderate by 10-15bp QoQ on a higher base and bunching up of PSL in the quarter, as lag impact of deposit re-pricing catches up. Non-interest income is likely to be strong, led by continous momentum in fee income and treasury gains. We expect reported fee income to grow 23% YoY. Asset quality has held up fairly well. However, elevated interest rates could lead to increase in slippages in mid corporate segment. In 2QFY12, slippage ratio had increased to 1.8% as against 1.1% in 1QFY12. The stock trades at 1.6x FY12E and 1.4x FY13E BV, and 8.9x FY12E and 7.5x FY13E EPS. Maintain Buy. Key things to watch for: (1) Performance on margins, (2) Sustained traction in fee income growth, (3) Trend in slippages, and (4) Restructured portfolio.
ITC
Prabhudas Lilladher
We expect Cig volumes to grow 6% for the quarter. Continued revenue momentum (expect 20% plus revenue growth) in Non-Cig FMCG business, with sustained higher profitability in Paper and Agri division, will mark Q3. We expect stock performance to remain range-bound as one approaches the budget. Cig did not see any excise increase in the previous budget. We are building in 15% excise increase in Cig for FY13e.
Motilal Oswal
We expect ITC to post 17.4% YoY revenue growth to Rs 64.7 billion. Margin expansion of 60bp will drive 19% growth in EBITDA to Rs 24.2 billion and net profit to Rs 16.4 billion. Led by continued strength in consumer demand, we expect cigarette volumes to grow 6.5%. Price increases in premium brands like Classic and Navy Cut in 2Q, coupled with no increase in excise duty will result in 100bp EBIT margin expansion to 56.3%. We expect 20% increase in FMCG sales and 16% decline in EBIT losses. Improving profitability in food, education and lifestyle retail businesses should lower EBIT losses. Paper margins are likely to expand by 120bp to 23% due to improved realizations and a favorable mix; revenue growth will be moderate at 12% owing to lack of capacity. We expect the agri business to record 15% revenue growth, with margins expanding by 180bp, benefitting from rupee depreciation. Though revenue growth in hotels will be subdued, margins are likely to improve by 50bp to 32%, in line with earlier quarters. The stock trades at 26.4x FY12E EPS of INR7.8 and 7.1x FY13E EPS of INR9.2. ITC is our top pick in the FMCG space. Buy.
Wipro
Prabhudas Lilladher
We expect Wipro to report IT Services revenue growth of 2.5% in USD terms to USD 1,510 million, in line with their guidance of 1.8-3.8% QoQ growth. We expect volumes to grow by 4.5% sequentially, with no pricing improvement. EBITDA margin is expected to expand by 221bps due to currency depreciation. We are expecting management commentary on change in strategy to perform in line with its Tier-1 competitors. We expect positive commentary with guidance of investment in Sales and Marketing effort by the company.
Motilal Oswal
We expect Wipro`s IT Services 3QFY12 revenues at USD 1.5 billion, up 2.1% QoQ. This is at lower end of company`s guided band of 1.9-3.9%, with 3% QoQ volume growth partly offset by 170bp hit from cross currencies (depreciation of GBP, EUR and INR v/s USD). We expect overall rupee revenue at Rs 99.2 billion, up 9.1% QoQ. We expect overall EBIT margin at 18.5%, up 300bp QoQ; but, adjusting for estimated Rs 2.8 billion hedge losses in the topline (which we take below the operating line), EBIT margin declines 30bp QoQ (from 16.4% to 16.1%). We expect IT Services` EBIT margin at 22.5%, up 250bp QoQ, but down 140bp QoQ to 19.6% when topline hedges are adjusted. We expect Wipro`s PAT to grow 4.3% QoQ to Rs 13.6 billion, lower than peers due to hedge losses (estimated at Rs 2.8 billion). The stock trades at 18.3x FY12E and 16x FY13E earnings. Maintain Neutral, with a target price of Rs 407, based on 16x FY13E earnings.
JSW Steel
Prabhudas Lilladher
Led by 3.7% growth in steel volumes QoQ and flat realisations, revenue is expected to grow by 3.7% QoQ to Rs 79 billion. We expect increase in cost of steel production by Rs800 per tonne QoQ due to higher weighted cost of iron ore. Hence, EBITDA per tonne would decline by 12% QoQ or Rs 833 to Rs 6,020. Accordingly, EBITDA would decline by 9% QoQ to Rs 11.7 billion. Adjusted PAT would fall by 32% QoQ to Rs 3.3 billion due to higher depreciation and interest cost associated with commissioning of 3.2mtp crude steel facility. We expect loss of Rs 1.9 billion for its 49% share in Ispat.
Motilal Oswal
Revenue to remain flat QoQ with flat volumes and realization: We expect 3QFY12 standalone net sales to remain flat QoQ (+32% YoY) at Rs 76.6 billion on the back of flattish steel volumes and realizations. We expect JSTL`s saleable steel volume to be up 19% YoY (flat QoQ) to 1.9m tons, despite Karnataka mining ban, due to more availability of e-auction ore. Average steel realization should be up 11% YoY (flat QoQ) at Rs 40,557/ton. Domestic steel prices are flattish due to lackluster demand despite sharp rupee depreciation. Prices of flat steel remain flat while long product prices are up 2-3%. EBITDA to be up 21% QoQ: JSTL`s saleable steel production is up MoM as more iron ore is available due to eauction ore. We expect JSTL`s EBITDA to be up 21% QoQ at Rs 9.5 billion due to higher capacity utilization of Vijaynagar plant. We expect EBITDA/ton to be USD 99, up from USD 92 in 2QFY12. Production improves with ore availability; but margins remain under pressure: We expect Adj PAT to improve 73% QoQ to Rs 2 billion on lower base of 2QFY12 when steel production had been impacted due to non-availability of iron ore, and costs had increased due to imports of ore from neighboring states. With more iron ore available from eauction, we expect JSTL to ramp up production gradually in next few months although margins will be under pressure in near term. The stock trades at 8.4x FY13E EPS and EV of 5.3x FY13E EBITDA. Maintain Sell.
Reliance Industries (RIL)
Prabhudas Lilladher
On the back of declining GRMS during the quarter, RIL is likely to report weak set of numbers. Benchmark Singapore GRMs have averaged at USD 7.9/bbl. We expect GRMS of USD 7.0/bbl for RIL during the quarter. Weakness in the Dubai-AH spreads is likely to adversely impact the spreads over benchmark GRMs. Rupee depreciation and higher other income are likely to help matters during the quarter.
Motilal Oswal
We expect RIL to report 3QFY12 GRM of USD7.7/bbl v/s USD10.1/bbl in 2QFY12. Petchem EBIT is expected to be lower QoQ despite decent margin performance due to subdued volumes (2QFY12 volumes were up 21% QoQ). We expect 3QFY12 KG-D6 gas volume of 41mmscmd v/s 45.3mmscmd in 2QFY12. We expect RIL to report PAT of Rs 49.5 billion (down 13.1% QoQ and 3.6% YoY). The muted performance for the quarter is largely on account of lower GRM, lower petchem volumes and decline in KG-D6 production, partially compensated by 10% rupee depreciation. Also, in E&P segment, RIL`s lower share of 60% for full 3 months in 3QFY12 v/s only for one month (September) in 2QFY12. Key things to watch out for: (a) GRM, (b) Petchem margin, (c) KG-D6 production. RIL trades at 10x FY13E adjusted EPS of Rs 75.4. We maintain Neutral due to concerns on cash utilization, RoE reaching sub-15%, and increased share (80%) of cyclical refining and petchem businesses to the earnings.
Axis Bank
Prabhudas Lilladher
We expect loan growth of 6% QoQ in Q3FY12 and with 2% contraction in H1FY12. We see risks to our 21% loan growth assumption for FY12, though seasonality in loan growth is stronger for Axis in H2. We expect margins to moderate by 15bps in Q3FY12. Slippages have inched up in Q2FY12 and given the high share of SME credit, we expect moderate inch up in slippages from Q2FY12. However, due to lower investment depreciation, we expect provisions to trend down. Overall, we expect 13% PAT growth in Q3FY12.
Motilal Oswal
We expect AXSB to post higher-than-industry growth, with loan growth of 22% YoY and 8% QoQ. Sequentially, we expect deposit growth to be in line with loan growth. However, on a YoY basis, deposit growth is likely to be strong at 34%+. In 2QFY12, the bank had reported a sharp increase of 50bp QoQ in NIM, led by increase in loan yields and cooling bulk deposit rates. We expect margins to moderate by 10-15bp QoQ on a higher base and bunching up of PSL in the quarter, as lag impact of deposit re-pricing catches up. Non-interest income is likely to be strong, led by continous momentum in fee income and treasury gains. We expect reported fee income to grow 23% YoY. Asset quality has held up fairly well. However, elevated interest rates could lead to increase in slippages in mid corporate segment. In 2QFY12, slippage ratio had increased to 1.8% as against 1.1% in 1QFY12. The stock trades at 1.6x FY12E and 1.4x FY13E BV, and 8.9x FY12E and 7.5x FY13E EPS. Maintain Buy. Key things to watch for: (1) Performance on margins, (2) Sustained traction in fee income growth, (3) Trend in slippages, and (4) Restructured portfolio.
ITC
Prabhudas Lilladher
We expect Cig volumes to grow 6% for the quarter. Continued revenue momentum (expect 20% plus revenue growth) in Non-Cig FMCG business, with sustained higher profitability in Paper and Agri division, will mark Q3. We expect stock performance to remain range-bound as one approaches the budget. Cig did not see any excise increase in the previous budget. We are building in 15% excise increase in Cig for FY13e.
Motilal Oswal
We expect ITC to post 17.4% YoY revenue growth to Rs 64.7 billion. Margin expansion of 60bp will drive 19% growth in EBITDA to Rs 24.2 billion and net profit to Rs 16.4 billion. Led by continued strength in consumer demand, we expect cigarette volumes to grow 6.5%. Price increases in premium brands like Classic and Navy Cut in 2Q, coupled with no increase in excise duty will result in 100bp EBIT margin expansion to 56.3%. We expect 20% increase in FMCG sales and 16% decline in EBIT losses. Improving profitability in food, education and lifestyle retail businesses should lower EBIT losses. Paper margins are likely to expand by 120bp to 23% due to improved realizations and a favorable mix; revenue growth will be moderate at 12% owing to lack of capacity. We expect the agri business to record 15% revenue growth, with margins expanding by 180bp, benefitting from rupee depreciation. Though revenue growth in hotels will be subdued, margins are likely to improve by 50bp to 32%, in line with earlier quarters. The stock trades at 26.4x FY12E EPS of INR7.8 and 7.1x FY13E EPS of INR9.2. ITC is our top pick in the FMCG space. Buy.
Wipro
Prabhudas Lilladher
We expect Wipro to report IT Services revenue growth of 2.5% in USD terms to USD 1,510 million, in line with their guidance of 1.8-3.8% QoQ growth. We expect volumes to grow by 4.5% sequentially, with no pricing improvement. EBITDA margin is expected to expand by 221bps due to currency depreciation. We are expecting management commentary on change in strategy to perform in line with its Tier-1 competitors. We expect positive commentary with guidance of investment in Sales and Marketing effort by the company.
Motilal Oswal
We expect Wipro`s IT Services 3QFY12 revenues at USD 1.5 billion, up 2.1% QoQ. This is at lower end of company`s guided band of 1.9-3.9%, with 3% QoQ volume growth partly offset by 170bp hit from cross currencies (depreciation of GBP, EUR and INR v/s USD). We expect overall rupee revenue at Rs 99.2 billion, up 9.1% QoQ. We expect overall EBIT margin at 18.5%, up 300bp QoQ; but, adjusting for estimated Rs 2.8 billion hedge losses in the topline (which we take below the operating line), EBIT margin declines 30bp QoQ (from 16.4% to 16.1%). We expect IT Services` EBIT margin at 22.5%, up 250bp QoQ, but down 140bp QoQ to 19.6% when topline hedges are adjusted. We expect Wipro`s PAT to grow 4.3% QoQ to Rs 13.6 billion, lower than peers due to hedge losses (estimated at Rs 2.8 billion). The stock trades at 18.3x FY12E and 16x FY13E earnings. Maintain Neutral, with a target price of Rs 407, based on 16x FY13E earnings.
JSW Steel
Prabhudas Lilladher
Led by 3.7% growth in steel volumes QoQ and flat realisations, revenue is expected to grow by 3.7% QoQ to Rs 79 billion. We expect increase in cost of steel production by Rs800 per tonne QoQ due to higher weighted cost of iron ore. Hence, EBITDA per tonne would decline by 12% QoQ or Rs 833 to Rs 6,020. Accordingly, EBITDA would decline by 9% QoQ to Rs 11.7 billion. Adjusted PAT would fall by 32% QoQ to Rs 3.3 billion due to higher depreciation and interest cost associated with commissioning of 3.2mtp crude steel facility. We expect loss of Rs 1.9 billion for its 49% share in Ispat.
Motilal Oswal
Revenue to remain flat QoQ with flat volumes and realization: We expect 3QFY12 standalone net sales to remain flat QoQ (+32% YoY) at Rs 76.6 billion on the back of flattish steel volumes and realizations. We expect JSTL`s saleable steel volume to be up 19% YoY (flat QoQ) to 1.9m tons, despite Karnataka mining ban, due to more availability of e-auction ore. Average steel realization should be up 11% YoY (flat QoQ) at Rs 40,557/ton. Domestic steel prices are flattish due to lackluster demand despite sharp rupee depreciation. Prices of flat steel remain flat while long product prices are up 2-3%. EBITDA to be up 21% QoQ: JSTL`s saleable steel production is up MoM as more iron ore is available due to eauction ore. We expect JSTL`s EBITDA to be up 21% QoQ at Rs 9.5 billion due to higher capacity utilization of Vijaynagar plant. We expect EBITDA/ton to be USD 99, up from USD 92 in 2QFY12. Production improves with ore availability; but margins remain under pressure: We expect Adj PAT to improve 73% QoQ to Rs 2 billion on lower base of 2QFY12 when steel production had been impacted due to non-availability of iron ore, and costs had increased due to imports of ore from neighboring states. With more iron ore available from eauction, we expect JSTL to ramp up production gradually in next few months although margins will be under pressure in near term. The stock trades at 8.4x FY13E EPS and EV of 5.3x FY13E EBITDA. Maintain Sell.
