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This article is more than 2 year old.

CLSA says earnings took a hit amid demand slowdown, market outlook cautious

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CLSA believes that corporate earnings will take a hit as outlook remains cautious. Of the 70 results announcements from our India coverage universe so far, 47 percent were above our expectations, 19 percent were in-line and 34 percent were below, said the research house.

CLSA says earnings took a hit amid demand slowdown, market outlook cautious
As demand in consumption space and auto sector slowed down, CLSA believes that corporate earnings took a hit due to the cautious market outlook. Of the 70 results announcements from our India coverage universe so far, 47 percent were above our expectations, 19 percent were in-line and 34 percent were below, said CLSA in its report.
It further said, "Nifty EPS estimates for FY20 have been cut to current 4 percent, and we expect a shade below 20 percent earnings growth."
The report also outlined that the auto sector slumped more than the consumption space. "The weakness in auto volumes did translate to poor results, as expected. Managements gave further weak outlooks for the months ahead. Non-auto consumer results were mostly in-line, partly as relatively weaker volumes were made up generally lower A&P (advertising and promotion) spends and higher margins."
The research house pointed out that the corporate banks' results were mixed for Q1, partly due to varied asset quality performance. Overall for corporate banks, given a weak base, the banks did much better in terms of profitability.
For IT sector, the brokerage said that the margin challenges did drive earnings cut for most companies. Mid-cap IT companies were weaker than larger companies. Meanwhile, on cement sector, it said that earnings upgrades post results were mostly margin-led as higher realisations and lower costs have driven multi-year high EBITDA/tonne margins.
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