Dalal Street Investments

Indian Stocks Revised Earnings – Sensex Targets

April 6, 2010

The bulls have completely taken control of the market with the Sensex and Nifty touching new 52 week highs and USD taking a beating indicating consistent FII flows into the market. Just minutes after Goldman Sachs released its Top 20 Buys in the Indian Stocks earlier today, Deutsche Bank has come with a somewhat very bold report and has pegged the Target for Sensex by 2010 end at a new life time high of 22,000.This is a significant change compared to its Jan report which pegged earnings at Rs 1,050.

Just last weekend, we were perusing through other brokerage reports and their earnings estimates. Here is a brief excerpt from our study.

Deutsche Bank – 2010 annual Sensex target of 22,000 implies an upside of ~24% from current levels, and a PE of 20x based on DB FY11 EPS estimates. Although our target multiple seems steep, strong economic recovery should drive robust earnings upgrades leading to mid-cycle valuations [Recollect, historical Indian Sensex Average P/E is 15, and now Deutsche is talking of 20, quite a big P/E expansion on the basis of fundamentals, but possible] India’s GDP growth to an 8-9% trajectory in next 12 months. We will discuss Deustche Bank’s view in a separate post but lets stick to releasing SENSEX FY 2011 earnings estimates.

  • Bofa-Merrill – FY 11 EPS Rs 1,100 and FY 12 Rs 1,300
  • UBS – FY 11 EPS Rs 1,146 and FY 12 Rs 1,365 – March 2011 target for index at 21,000 based on Avg P/E of 15.3
  • CLSA – FY 11 EPS Rs 1,046 [revised upwards from Rs 1,000, still quite conservative as consensus is now towards 1,100] and FY 12 Rs 1,300
  • Edelweiss – FY 11 EPS Rs 1,080
  • Deutsche Bank – FY 11 EPS Rs 1,10o [Jan 2010 they estimated FY 11 EPS to be Rs 1,050]
  • Morgan Stanley – FY 11 EPS Rs 1,232 [Base Case]
  • Morgan Stanley – FY 11 EPS Rs 1,305 [Bull Case] Well Morgan runs way too fast, instead of being bullish on EPS they can expand the P/E to take sensex higher, as usually the case is.
  • Kotak Securities – FY 11 EPS Rs 1,100
  • DalalStreet.Biz Consensus EPS – Rs 1,110 for FY 2011

Earlier Coverage on India’s Sensex Earnings can be found here – CLSA’s Coverage, Merrill Lynch, Morgan Stanley Strategy, Entire Archive of Indian Equity Analysis. Enjoy the rising tide of Sensex 🙂


One Response to “Indian Stocks Revised Earnings – Sensex Targets”

  1. Explaining Indian Inflation, Valuation and Deficit | Dalal Street on April 16th, 2010 6:22 PM

    […] April 16, 2010 The Indian Inflation, Valuation and Deficit have all touched a high and Investors question the rising SENSEX amidst such a macro environment. We agree that Deficit is a cause of concern, however, lately Foreign Investors have turned a blind eye on the mis-represented and ever growing Indian Inflation, which is an accepted way of life. As said in one of our previous article, valuations get expensive when Investors see GROWTH ahead – paving way for P/E expansion. […]

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