Dear All,
Forwarding you the Market Strategy for June 2011.
The 4QFY2011 Sensex profits came in below our estimates, on account of negative surprises in Sensex heavyweights such as SBI and ONGC, due to cleaning up of balance sheet in case of the former and higher subsidy burden in case of the latter. Adjusting for these numbers, Sensex numbers were as per our expectations with the top line growing at a healthy rate of 22.4% yoy and adjusted bottom line increasing by 10.2% yoy. The Sensex OPM declined as per our expectations, as companies were hit by inflationary pressures. As a result, despite strong top-line growth, the bottom line did not grow at the same rate.
However, going ahead, with easing margin pressures as inflation moderates from 2HFY2012 onwards, we expect Sensex profit growth to increase strongly at an 18.2% CAGR over FY2011-13E. In our view, a target multiple of 15x is justified on FY2013E EPS. Besides, the Sensex yield is 153bp below bond yield, which is similar to the long-term average discount of 143bp. A multiple of 15x FY2013E EPS yields a Sensex target of 21,033, giving a reasonable ~14% upside from current levels. Hence, we remain positive on the Indian markets.
Overall, we are bullish on sectors that have high earnings visibility and are reasonably valued, such as BFSI, metals, construction and pharma. In the mid-cap space, there are a number of counters that are trading at a deep discount to largecap companies. As earnings for large-cap companies increase, it is only a matter of time before these mid-cap companies also start witnessing strong growth and once the market improves, this space is likely to be strong outperformer. Having said that, investors have to be selective in their stock picking. We prefer mid-caps that are trading at beaten-down valuations, such as tyres, or where a significant opportunity is unfolding, as in mining, or where the business model is strong, like in companies with branded products.
Kindly click on the following link to view the Report.
If you have any further queries, feel free to call us on 022 39357600, Extn: 6865 or mail us at advisory@angelbroking.com
With best regards,
Fundamental Advisory Desk
Angel Broking
Akruti Star,6th Floor, Road No.7,MIDC, Andheri (E),Mumbai – 93.
Call : (91) (022) 39357600 Ext. 6865
Website : www.angelbroking.com
Disclaimer: Ours is an advisory role. The final decision and consequences based on our information is solely yours. Moreover, in keeping with regulatory guidelines, we do not guarantee any returns on investments. Prospective investors and others are cautioned that any forward-looking statements are not predictions and may be subject to change without notice.
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