Strategy : 4QFY25 review: Nifty EPS a beat; but FY26/27 estimates cut by JM Financial Institutional Services
Nifty50 EPS grew by 4.9% in 4QFY25, ahead of expectations of a 2.2% YoY decline. Factoring in the 4QFY25 results, our Nifty50 EPS for FY26E and FY27E have been cut by 5.3% and 5.9% respectively. Consequently, our Nifty50 EPS growth now stands at 12.0% (vs. 16.4% earlier) for FY26E and 14.3% (vs. 15.1% earlier) for FY27E. Of these, the largest EPS cuts for FY26E are in Automobiles, Cement, Oil & Gas, and NBFCs. For FY26E, we expect Telecom, Metals & Mining, Consumer, Oil & Gas and Banks to do the heavy lifting. Out of the 50 companies in the Nifty, 18% missed estimates in 4Q while 48% beat our estimates and the rest reported an in-line quarter. Further, if we split 4QFY25 performance in terms of market capitalisation, we see that the proportion of misses in small caps was the largest, followed by mid-caps and then large caps; 31% of small-cap companies missed expectations, while the misses were lower in midcaps and large caps at 28% and 17% respectively.
4QFY25 Nifty50 EPS growth ahead of expectations: In 4QFY25, Nifty50 EPS grew 4.9% YoY (vs. expectation of 2.2% decline YoY). Ex-financials, EPS grew 10.5% YoY (vs. expectation of -0.8% YoY). On a YoY basis, amongst key sectors, (1) Financials declined 1.8% YoY, (2) Oil & Gas declined 6.6% YoY, (3) IT declined 3% YoY, and (4) consumer declined 9.3% YoY. Further, on a YoY basis, sectors that saw the highest YoY EPS growth were: (1) Metals & Mining (+33.2% YoY), (2) Ports and Logistics (+23.3% YoY), (3) Industrials (+18% YoY), and (4) Infrastructure (+16.7% YoY)
EPS estimates cut for FY26E and FY27E: Through 4QFY25 results, our Nifty50 EPS for FY26E and FY27E have been cut by 5.3% and 5.9% respectively. Consequently, our Nifty50 EPS growth now stands at 12.0% (vs. 16.4% earlier) for FY26E and 14.3% (15.1% earlier) for FY27E. Of these, the largest EPS cuts for FY26E are in Automobiles, Cement, Oil & Gas, and NBFCs
Which sectors have to do the heavy lifting in FY26E?: We forecast 12.0% YoY growth in FY26E Nifty50 EPS. Sectors that are expected to do the heavy lifting are: Consumer (+14% YoY and 5.6% weight in Nifty50 PAT), Telecom (+73% YoY growth and 2.5% weight in Nifty50 PAT), Metals and Mining (+23% YoY growth and 7.2% weight in Nifty50 PAT), Oil & Gas (+23% YoY growth, and 11.0% weight in Nifty50 PAT) and Banks (+7% YoY growth and 37.7% weight in Nifty50 PAT).
JMFL coverage universe EPS grows 9.5% YoY in 4QFY25: The JM Financial coverage universe 4QFY25 EPS grew 9.5% YoY. Sectors that saw the highest YoY EPS growth were: (1) EMS (+113% YoY), (2) Aviation (+62% YoY), and (3) Healthcare (+44% YoY). Sectors that saw the weakest YoY EPS performance included: (1) Building Materials (-28% YoY), (2) Depositories (-22% YoY), and (3) Auto Ancillaries (-17% YoY). Compared to estimates, the largest beats were seen in Internet, followed by EMS and Utilities. Among the misses, Healthcare and Real Estate led the pack.
Small caps had higher share of misses: Out of the 50 companies in the Nifty, 18% missed estimates in 4Q while 48% beat our estimates and the rest reported an in-line quarter. Further, if we split 4QFY25 performance in terms of market capitalisation, we see that the proportion of misses in small caps was the largest, followed by mid-caps and then large caps; 31% of small-cap companies missed expectations, while the misses were lower in midcaps and large caps at 28% and 17% respectively.
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