44% of companies missed PAT expectations in Q2FY25 so far
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Q2FY25 earnings so far, have made investors jittery and we have seen stocks of companies reporting weak earnings/ weak outlook correcting. Based on the analysis of 157 companies who have reported out of the JM Financial coverage universe of 275 companies, we come to the following conclusions: (1) 44% (69 companies) missed expectations, 41% (65 companies) beat expectations while 15% (23 companies) were inline. (2) 27% (43 companies) have reported weaker revenue growth than expected. (3) There is a slowdown in urban demand seen across FMCG, retail, auto and mall operators. (4) Chemicals and consumer durables have also seen a moderation in demand (5) MFIs and select private sector banks/ NBFCs witnessed stress in their unsecured book.
BFSI: PSU banks reported strong numbers due to recoveries, which drove down credit costs and lower opex. MFIs saw a weak Q2, driven by higher credit costs. NBFCs and private banks were a mixed bag, with misses driven by elevated credit costs.
FMCG and Retail: Larger companies indicated a weakening of urban demand, raw material inflation, and the inability to take commensurate price hikes.
Auto OEMs and Ancillaries: Auto OEMs were impacted by demand issues and raw material costs. Q2 was strong for Auto Ancillaries.
Chemicals: Sluggish demand and piling of inventory with customers led to misses. Favourable revenue mix and strong contract manufacturing revenue drove select beats.
Oil Refining & Marketing and City Gas Distribution: Oil Refining & Marketing saw a tepid Q2, due to a weak GRM and the LPG business struggling to recover. CGD companies missed estimates due to higher gas costs.
Real estate, REITs, and hotels: Timely project completions and inventory sales drove beats in real estate. Hotels saw a good Q2 and hinted at a robust Q3 (wedding season). Mall consumption was weak.
EMS and consumer durables: Strong Q2 for EMS companies, lower channel inventories and acquisitions drove growth. Consumer durable companies largely missed estimates, driven by weak demand, high raw material prices, elevated ad spends and BIS-related impacts.
Building Materials: Largely missed, due to aggressive pricing by unorganized players, lower utilization levels and the resulting operating deleverage.
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