Q3FY2009 earnings review: Sharekhan

According to Sharekhan’s Q3FY2009 earnings review, the main culprits behind the Sensex’ earnings downgrades are the automobile companies (Mahindra and Mahindra, Maruti Suzuki and Tata Motors), Hindalco Industries, Ranbaxy Laboratories and DLF.

Sharekhan’s Report:

The Sensex’ earnings declined by nearly 10.6% in Q3FY2009 as the slowing economic activity took its toll on the stock market, marking the first quarterly decline in the earnings of the benchmark index in the past six years. In terms of sectors, banks (earnings up 22.4% year on year [yoy]), information technology (IT) companies (earnings up 14.7% yoy) and telecommunications (telecom) companies (earnings up 15.6% yoy) made positive contribution to the growth in the Sensex’ earnings. On the other hand, automobile companies (earnings down 74.2% yoy), metals (earnings down 37.7% yoy) and real estate companies (earnings down 68.7% yoy) acted as a drag on the Sensex’ earnings. The Sensex (excluding the oil companies) saw a decline of 5.2% yoy in its earnings during the quarter as against our expectation of a 0.4% earnings decline for the quarter.

The disappointing earnings performance of the third quarter has led to further downward revision in the earnings estimates for the Sensex companies. Now, for FY2009 the consensus earnings per share (EPS) estimate for the Sensex stands at Rs 838, which is sharply down from Rs 897 estimated at the beginning of the results season. For FY2010 also, the consensus EPS estimate for the Sensex was reduced by 10.5% to Rs 881 during January 2009. The revised estimates indicate a growth of just 5.2% yoy in FY2010. The main culprits behind the Sensex’ earnings downgrades are the automobile companies (Mahindra and Mahindra, Maruti Suzuki and Tata Motors), Hindalco Industries, Ranbaxy Laboratories and DLF.

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