Strategy : 4QFY25 Nifty 500 review - Weak trends persist by Kotak Institutional Equities
4QFY25 Nifty 500 review: Weak trends persist
Nifty 500 Index companies reported single-digit yoy sales growth (+5% yoy) for the eighth quarter in 4QFY25. However, EBITDA and PAT both grew 12% and 7% yoy, respectively, with a decent set of consumer-facing companies reporting margin expansion. Nonetheless, a broad-based earnings cut was observed across the Nifty 500 Index universe.
Nifty 500 companies saw 5% sales growth, 12% EBITDA growth, 7% PAT growth
4QFY25 results of the Nifty 500 companies show that the broader universe continues to struggle with weak revenue growth (+5% yoy); see Exhibit 1. However, EBITDA grew 12% yoy, while PAT grew 7% yoy (see Exhibits 2-3) on higher margins. Construction materials, consumer durables & apparel, diversified financials, EMS, healthcare services, hotels & restaurants, internet software & services, pharmaceuticals, telecom and transportation sectors reported decent-to-strong sales growth yoy. Exhibits 4-6 show sector-wise growth in key financials over 4QFY21-4QFY25.
Weak sales growth across market caps
The contribution of the top-100 companies to revenues of the Nifty 500 Index universe has remained stable at around 70%, while the contribution to PAT has been broadly stable at around 75% (see Exhibit 7). We note that sales growth remains weak across market caps, while the improvement in yoy EBITDA growth was more notable for mid- and small-caps. PAT growth was weak for large-caps and small-caps, but strong for mid-caps led by mid-cap. banks, metals & mining and pharmaceuticals. Exhibits 8-10 show the sectoral earnings growth of large-cap., mid-cap. and small-cap. companies in the Nifty 500 Index universe.
Margins expanded 30 bps qoq and 85 bps yoy
Nifty 500 Index companies reported an improvement in margins in 4QFY25, with composite EBITDA margins expanding by 85 bps and 32 bps yoy (see Exhibit 11). Capital goods, construction materials, consumer durables and apparel, fertilizer and agri-chemicals, gas utilities, media and transportation sectors reported a strong qoq improvement in EBITDA margins (see Exhibit 12). We note that RM costs/sales declined 77 bps yoy (80 bps qoq), while employee costs/sales rose 14 bps yoy for the Nifty 500 universe (see Exhibits 13-14).
Small-caps witnessed largest cuts on their FY2026 EPS estimates
The continued weakness in parts of the economy has resulted in continued downgrades to consensus earnings across market caps for FY2026E/27E (see Exhibit 15). Small-caps saw a 6% cut in their FY2026 EPS estimates versus 2% for large-caps and 3% for mid-caps. The downward revisions have been broadbased (see Exhibit 16), with consumer-facing businesses seeing larger cuts. The same can be seen in earnings cuts of individual stocks of the Nifty 500 Index, with 70% stocks seeing downgrade
Above views are of the author and not of the website kindly read disclaimer
