Investment cycle yet to bottom out
Investment cycle may not have bottomed out as yet; several data points suggest exacerbating trend: We note slowing investment demand based on (i) financial sanctions (RBI data) to private sector projects declining (down 46% in FY2012) at an accelerating pace (Q4FY12 down 70% y-o-y), (ii) project investments (CMIE) continuing to contract in Q1FY13 (down 40% y-o-y, level now similar to last seen in Q1FY06), (iii) even consumable items (reflective of opex rather than capex) like abrasives (Carborundum and Grindwell sales data) flattening in Q1FY13, also getting reflected in macro variables with IIP moving average (4 months) turning negative in June 2012 and PMI for July declining sharply, and (iv) several companies facing broad capex (capital expenditure) demand highlighting about 50-60% drop in ordering activity. Our tracking of 11 uncovered small industrials (Q1 sales—R43 bn) indicates flat top line with 5% Ebitda (earnings before interest, depreciation and amortisation ) decline and 10% lower PAT (profit after tax); covered companies’ performance is better primarily led by long execution cycle companies such as
Be the first to comment.
