Kotak’s Sanjeev Prasad sees earnings recovery in H2FY18; prefers SBI

The September quarter earnings season is almost over and thankfully, it has not been that disappointing as was expected. India Inc. reported results which were largely in-line with estimates but the recovery in earnings is likely to take place only by second half of FY18.

“In general, companies have reported decent numbers compared to expectations. In terms of Nifty50 names, EBITDA is slightly ahead of our estimates especially for companies such as RIL, Tata Motors, Bharti Airtel etc.” Sanjeev Prasad, co-head, Kotak Institutional Equities said in an interview with CNBC-TV18.

“However, OMC witnessed some weakness in their results for the quarter ended September. On a YoY basis, EBITDA was up 13 percent for the Nifty50 stocks. We could see some recovery in the second half of FY18,” he said.

Prasad further added, the fact that we are stabilising as far as earnings numbers are concerned is encouraging. This is the first quarter in which we have seen some earnings upgrades compared to historical quarters in which we have seen more downgrades than upgrades, he noted.

Prasad is positive on State Bank of India (SBI) which he said is now reasonably valued. As far as other PSU banks are concerned, he said the one-time adjustment in terms of recapitalization has already taken place.

The most important information with regard to recapitalisation is how much money gets distributed among various banks. More important, investors should also focus on the govt objective with regards to tackling of NPA.

The September quarter which was overall in-line with estimates has not been that good for industrial or infrastructure type companies. Having said that, the quarter also saw many companies struggling to understand and implement GST.