SSKI Research : Results review Q2FY07: Full steam ahead

A 33.5%yoy growth in Sensex earnings for Q2FY07 (vis-à-vis our expectations of 27.5%) vindicates our view that India Inc's growth story is on track. Sectors driving the higher-than-estimated performance include metals, petrochemicals, telecom and software. SSKI universe earnings growth of 45.8% is also ahead of our expectations (43.5%). On the back of the strong performance, we have marginally upgraded our FY07 & FY08 Sensex earnings estimates by 2.2% and 1.4%.respectively. In October, we had upgraded our Sensex target range to 12,500 to 13,400 (17-18xFY08 earnings) factoring in reduced cost of capital. We further upgrade the range to 12,800 -13,600 factoring in earnings upgrade. Buoyed by strong growth earrings, the Sensex is approaching our target and is currently trading at 17.4x FY08 earnings. Our top large cap picks include BHEL, Bharat Forge, Grasim Industries, Infosys, ITC, ONGC, Tata Motors and Zee.

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