IGI Logo

Nifty EPS estimates stable

* In this report, we present our interim review of the 4QFY24 earnings season.

* As of 4 th May’24, 94/28 companies within the MOFSL Universe/Nifty announced their 4QFY24 results. These companies constitute: a) 56% and 62% of the estimated PAT for the MOFSL and Nifty Universe, respectively; b) 46% of India's market capitalization; and c) 66% weightage in the Nifty.

* For the 28 Nifty companies, earnings grew 13% vs. expectations of 8%. The aggregate earnings of the 94 MOFSL Universe companies for 4QFY24 were in line with our estimates and grew 5% YoY (vs. our est. of +3% YoY). The earnings growth was fueled by the domestic cyclicals, such as BFSI and Auto, as expected. BFSI clocked a 22% YoY growth, while Auto reported a growth of 38% YoY (in line with our est. of +38%), driven by Maruti Suzuki and Bajaj Auto. In contrast, the aggregate performance has been dragged down by the O&G sector, which posted a 20% earnings decline (IOCL’s profit plunged 52% YoY). Excluding Metals and O&G, the MOFSL Universe and Nifty have recorded a 15% YoY earnings growth (vs. est. of +12%).

* The Cement sector reported a healthy growth of 33% YoY (vs. est. of +25% YoY).

* Excluding BFSI, profits for the MOFSL Universe would have declined 3% YoY (vs. est. of -4% YoY). Until now, 19/27 companies within the MOFSL Coverage Universe have reported an upgrade/downgrade of more than 3% each, leading to an adverse upgrade-to-downgrade ratio for FY25E. However, the EBITDA margin of the MOFSL Universe (excluding Financials) has declined marginally by 10bp YoY to 17.1% during the quarter thus far.

* Earnings of the 28 Nifty companies that have declared results so far jumped 13% YoY (vs. est. of +8% YoY), propelled by HDFC Bank, Coal India, ICICI Bank, Maruti Suzuki, and TCS. These five companies contributed 75% to the incremental YoY accretion in earnings. Conversely, Tech Mahindra, Reliance Industries, and Wipro contributed adversely to Nifty earnings. Only five companies within the Nifty reported profits below our expectations, while 10 recorded a beat, and 13 registered in-line results so far.

*  Nifty EPS stable: Our EPS estimates for FY25/FY26 have been stable so far at INR1,133/INR1,315 (vs. INR1,132/INR1,317).

* Summary of the 4QFY24 performance thus far: 1) Banks: Earnings growth for private banks has remained healthy, with AXSB, KMB, and RBL reporting betterthan-expected earnings. However, HDFCB, AXSB, KMB, FB, ICICIBC, IDFCFB, and IIB registered a mixed margin performance. The overall pace of NIM compression has moderated, even though funding costs continue to inch up. 2) NBFCs – Lending: Most vehicle financiers have reported that the demand momentum in the vehicle segment, especially in CV, has been subdued because of the ongoing elections. Most of the NBFCs have reported a stable CoB or a decline. 3) Automobiles: The 4QFY24 results so far have been in line. The growth has largely been driven by: a) healthy volume growth across most of the segments, ex-CVs, b) better product mix, c) lower commodity costs, and d) operating leverage. We believe that margin pressures will persist in the upcoming quarters due to the expected recurrence of certain costs. 4) Technology: The 4QFY24 results for Tier-1 companies have remained weak so far due to lower-thanexpected growth, weak demand, and the re-scope of contracts, as well as project cancellations. Discretionary spending shows no signs of picking up, and the nearterm outlook remains bleak. The guidance for FY25 came in lower than expected, even with muted expectations. 5) Consumer: The 4QFY24 results thus far have been in line. While consumption has been improving, staple demand trends have remained largely similar to those seen in 3QFY24, with a marginal increase in volumes on a YoY basis. The impact of the price cuts will settle down in 1HFY25 for most of the commodity-sensitive categories, and 2HFY25 may see price hikes. 6) Oil & Gas: The sector has reported mixed 4QFY24 results so far. RIL beat our estimates primarily due to a strong O2C performance, while IOCL fell short of our earnings estimates owing to a weaker-than-estimated refining margin. Refer to page 8 for the detailed 4QFY24 sectoral trends.

Performance in line: BFSI and Automobiles drive earnings

* Aggregate performance of the MOFSL Universe: Sales/EBITDA/PBT/PAT grew 6%/11%/5%/5% YoY (vs. est. of +8%/7%/5%/3%). Excluding Metals and O&G, the MOFSL Universe companies recorded a sales/EBITDA/PBT/PAT growth of 10%/ 17%/11%/15% YoY (vs. est. of +10%/12%/14%/12%) in 4QFY24.

* Nifty-50 companies that surpassed/missed our estimates Reliance Industries, HDFC Bank, Coal India, Axis Bank, Kotak Mahindra Bank, Ultratech Cement, Bajaj Auto, Tech Mahindra, Nestle, and SBI Life Insurance exceeded our profit estimates. Conversely, HCL Technologies, LTIMindtree, Titan, and HDFC Life Insurance missed our profit estimates for 4QFY24.

* Top FY25E upgrades: Coal India (15%), Axis Bank (3.8%), Maruti Suzuki (2%), Bajaj Auto (1.3%), and HDFC Bank (1.2%).

* Top FY25E downgrades: Bajaj Finance (-7.8%), HCL Tech (-6.7%), LTI Mindtree (- 6%), Titan (-5.7%), and Infosys (-5.7%).

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html

SEBI Registration number is INH000000412