HomeStock Market2013 strategy for 12 key sectors by Nomura

2013 strategy for 12 key sectors by Nomura


Nomura Holdings is a Japanese financial holding company, and a principal member of the Nomura Group. It along with its broker-dealer, banking and other financial services subsidiaries, provide investment, financing and related services to individual, institutional and government customers on a global basis with an emphasis on securities businesses. Strategy for 12 key sectors in 2013 by Nomura is given here:-

Auto & Autoparts

Nomura expects some sequential improvement in margins for most companies (excluding CV players) on the back of decent volume growth due to shift in festival season and easing of raw material costs. “Companies having exposure to CV cycle like Ashok Leyland, Bharat Forge and Tata Motors standalone will have a very weak quarter due to sharp volume decline and elevated discount levels,” the broking firm says in its report.


Incremental delinquencies and credit costs will be the key factors to watch in this quarter, says Nomura. “This should set the tone for loan losses for the rest of the year. Slowing loan growth and flat to marginally lower NIMs (q/q) are widely expected. Banks’ lending rate and deposit rate strategies for FY13 are contingent on RBI’s monetary policy pronouncements in the January 2013 policy. Subsequent to this event, we’ll watch out for evidence of a revival in corporate capex activity and loan growth guidance,” the report says.

Construction & Infra

“We expect 15% revenue growth for L&T while don’t expect any surprise on margin front. However, order inflow could be disappointing due to macro headwinds,” Nomura says.


“We expect a stable quarter with commodity cost inflation trending down. Expect ad and promotions (A&P) spends across the board to rise given the gross margin benefits, similar to Q2FY13,” Nomura says. It expects Jubilant Foodworks and ITC to deliver strong results, while commentary from Home and personal care (HPC) companies such as Hindustan Unilever, Colgate-Palmolive India, Marico and Dabur on volume progression will be keenly watched.

Electrical equipment

Nomura expects muted revenue growth for the sector on grim outlook for overall power sector. Execution activity is expected to have been hampered amidst concerns on environmental clearances and fuel availability. This apart, slowdown in domestic capex is also set to hamper growth profile for industrial equipment makers.

IT services

Muted quarter on growth, with cross currency to the aid. Nomura says the sector is unlikely to provide cues on a better FY14F. It sees aggregate organic growth at 2.7% QoQ (Vs 3.7% QoQ in 2Q) aided by 40-50 bps QoQ positive impact of cross currency moves. “Cognizant Technology, TCS and HCL Tech to lead growth, while Wipro and Infosys should continue to lag,” the report said.

“Margin moderation likely across tier 1 as well as tier 2 IT with Infosys/HCL among tier 1 and Hexaware within tier 2 being worst hit. Infosys is likely to cut organic growth guidance to 3.5% (Vs 5% earlier). Cognizant guidance, deal win trends and margin commentary key to watch,” it concluded.

Metals & Mining

Indian steel companies continue to see volume pressures on account of a weak steel demand. However QoQ volumes should improve on seasonal factors, says Nomura. “Steel prices have declined by Rs 500-1000 per tonne while there would be limited benefit of raw material price decline. At the same time companies would also see forex losses on account of rupee depreciation,” the report says. Overall, it expects a tough quarter for steel companies. “Non ferrous companies should benefit from better volumes and higher prices,” it says.

Oil & Gas

Oil price remained range-bound, with Brent averaging USD110 a barrel (up 1% YoY, flat QoQ). After sharp 36% gain in Q2, Singapore complex refining margins sharply tumbled by 27%. Most products cracks were weak, but most prominent were return of fuel oil cracks to discount to crude. Petchem prices rupee terms prices were marginally up. “We estimate gross under-recoveries of Rs 38,900 crore for Q3. Similar to Q2, we assume upstream subsidy share of Rs 15,100 crore, and assume provisional government cash compensation of Rs 15,000 crore (Rs 30,000 crore for first half of the year). But, these numbers would be all provisional, and may not mean much as subsidy numbers are only finalised at the time of full year results,” Nomura says.


“We believe the quarter ending December 2012 is characterised by: a) a lack of high-value launches in the US; b) a slowdown in domestic growth and c) less intense currency tailwinds. Except for Lupin, which launched Tricor and three OCs in the quarter, US launches were not materially large for most companies. Adjusted for large exclusivities of Lipitor and Zyprexa in Q2FY13, sales and EBITDA growth are 21.5% and 32%, respectively,” Nomura report says.


Private Independent Power Producers (IPPs): On the back of a pick-up in plant utilization post the ‘monsoon’ quarter and relatively steady realizations, expect revenues to be higher QoQ. A 5-7% QoQ drop in average landed cost of imported coal (rupee terms) would translate into QoQ rise in EBITDA and normalized PAT (or lower normalized loss). MTM exchange fluctuation losses are likely to drag reported PAT lower.

For NTPC, we expect 19% YoY rise in normalized PAT on the back of 12.5% growth in total generation, higher plant availablity.

For Power Grid Corp: We expect 4% revenue growth QoQ, but normalized PAT to remain flat; focus would be on addition to GFA (asset capitalization).

For Coal India: We forecast marginal QoQ decline in realization, EBTIDA margin at ~27% (down 300bps YoY) and normalized PAT at Rs 4,330 crore (up ~7.5% YoY)


Key items to watch for: 1) domestic price trends and its impact on margins — we understand some players have raised tariffs/ reduced freebies and commissions etc; which bodes well for competitive outlook; 2) data/3G take-up trends; 3) update on regulatory issues such as upcoming 2G re-auctions; and 4) Africa trends for Bharti.


“We believe that media names are looking beyond the quarter and investing for the future where digitization can transform the industry significantly. While we expect continuation of strong y-o-y topline growth for Zee (flattish q-o-q)we expect single digit y-y growth in EBITDA owing to a greater investment in content,” Nomura says.

For Dish: Nomura expects margins to decline on account of increase in content cost as the impact of negotiation with Mediopro will manifest itself in this quarter. The company has taken a price hike of Rs 20 in base pack (except south India and HD), which will likely manifest itself in Q3.

Shitanshu Kapadia
Shitanshu Kapadia
Hi, I am Shitanshu founder of I am engaged in blogging & Digital Marketing for 10 years. The purpose of this blog is to share my experience, knowledge and help people in managing money. Please note that the views expressed on this Blog are clarifications meant for reference and guidance of the readers to explore further on the topics. These should not be construed as investment advice or legal opinion. We do not offer any stock tips, investment, insurance or finance product related advice. Please consult a qualified financial planner and do your own due diligence before making any investment decision.
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