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BFSI and Auto in charge again; the Metals sector posts healthy earnings

* The Nifty 500 companies delivered strong performance and reported an earnings growth of 25% YoY in 3QFY24.

* The earnings growth was again fueled by the healthy earnings performance of the BFSI and Auto sectors, which reported 22% and 59% YoY earnings growth, respectively. O&G reported healthy 40% YoY earnings growth fueled by OMC's soaring profitability due to strong marketing margins.

* The Nifty 500 aggregate sales/EBITDA/adj. PAT grew 5%/15%/25% YoY to ~INR32.5t/INR6.3t/INR3.4t in 3QFY24.

* The Nifty 500 (ex-BFSI) registered an aggregate earnings growth of 27% YoY (-2% QoQ) in 3QFY24. However, ex-global commodities, aggregate earnings grew 21% YoY (+6% QoQ) during the quarter.

* Sales/EBITDA/adj. PAT for Nifty 500 grew ~3%/24%/38% YoY in 9MFY24.

* EBITDA margin expansion continues: Nifty 500 (ex-BFSI) margin expanded 220bp YoY to 15.7% in 3QFY24; however, it moderated 110bp sequentially after hitting an eight-quarter high of 16.8% in 2QFY24. EBITDA margin, excommodities (Metals and O&G), expanded ~140bp YoY and scaled a 12-quarter high to 18.7% YoY in 3QFY24.

Heavyweights propel earnings; broader markets’ share improves

* Heavyweights drive earnings: The earnings performance of the Nifty 500 companies was propelled by just a few heavyweights. The top five companies, i.e., IOC, HDFC Bank, TTMT, GAIL, and Adani Power contributed 33% to the incremental YoY accretion in earnings during the quarter.

* Of the 496 companies within the Nifty 500 that have declared their Dec’23 quarter results, 329 companies recorded earnings growth, while 167 posted an earnings decline/loss in 3QFY24. Among the companies that declared profits, 251 posted an earnings growth of over 15% YoY for the quarter.

* Earnings for Nifty 500/Nifty 50/Nifty 100/Nifty Midcap 100/Nifty Smallcap 100 jumped 25%/17%/25%/36%/27% YoY in 3QFY24.

Key sectoral highlights

* Of the 18 sectors (incl. BFSI) within the Nifty 500, 13 sectors reported profit growth, while five posted a decline during the quarter.

* Auto reported a 59% YoY jump in earnings in 3QFY24. While most of the companies delivered healthy earnings growth, heavyweights such as TTMT, MSIL, and Bajaj Auto drove the earnings significantly. Healthy Auto volumes, with a recovery in 2Ws, and strong margins drove sector profitability.

* Financials: BFSI clocked 22% YoY earnings growth in 3QFY24. Both Private and PSU banks continued to lead with ~25% YoY earnings growth. The quarter witnessed healthy business growth, controlled provisions, persistent NIM pressure, and high opex. Most of the banks witnessed stagnant or a slight dip in margins, barring select PSU banks.

* Consumer: Earnings improved 15% YoY (+4% QoQ) during the quarter. Muted volume growth led to weak cumulative sales growth; however, moderating input prices continued to drive profitability.

* Technology: Earnings growth moderated to ~1% YoY due to continued weakness in key verticals and geographies, with BFSI, Consumer, and Communications reporting muted growth. The mid- and small-cap IT services companies continued to outperform large caps in 3QFY24 as well.

* Metals: The sector reported 88% YoY earnings growth (+40% QoQ) in 3QFY24. Better operating performance on a YoY basis, led by lower input costs, led to a strong earnings recovery for the sector.

* Infra/Cement/Healthcare/Utilities/Capital Goods posted strong earnings growth of 39%/35%/28%/26%/12% YoY. Conversely, Chemicals/Media/ Retail recorded an earnings decline of 70%/18%/5% YoY, during the quarter.

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