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Results So Far – Looking Good

July 30, 2009

We are into the third week of the current reporting season, things still look positive and ahead of expectations, with 1QFY10 profits at 18/29 Sensex companies (excluding -oil) up 12.6% yoy (4% expected). At a still broader level, 178/500 companies have reported 17% yoy growth. There are more positive than negative surprises.

1QFY10 sales growth for 18/29 Sensex companies is 0.8% yoy (+3% expectation) While there is likely a commodity price component to modest demand, we believe this is a worrying trend. Businesses have clearly taken advantage of raw material costs (50% of expenses), but also appear to have cut other operating costs, collectively driving up margins 211bps yoy (Sensex). We believe rising margin is good, but rising demand/sales would probably be better.

The sector leaders have been Banks (65%+, although there are qualitative issues), IT Services (+22%, outlook remains strained), and Telecom. Materials, Consumer and Capital Goods have been in-line.

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