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India Earnings Expectations – Goldman Sachs

April 12, 2010

Goldman Sachs expects strong earnings momentum to continue in the fourth quarter. Estimates indicate sales growth to increase to 34% in 4Q FY10E from 22% in 3Q. Operating leverage and cost savings should lead to a strong operating performance with
EBIT growing by 58% in the current quarter, vs. 26% in 3Q. As a consequence of the robust top line growth and improving margins, we expect net income to rise by 44% yoy in 4Q vs. 20% yoy growth in 3Q

On a sequential basis, expect the bottom line to rise by 29% qoq, led by Industrials, Oil & Gas, Real Estate, Infra and Materials. We expect 10 sectors to witness qoq margin expansion, with telecom and consumer staples lagging.

With MSCI India trading close to 1 SD above its 10-year average, Indian valuations are reflecting robust growth expectations. Against that backdrop, India Inc’s outlook on FY11 earnings would be in focus. Goldman’s Top Buys in Indian Equities were already out last week.

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