Strategy : Expect double-digit PAT growth in 1QFY26E By JM Financial Services
Expect double-digit PAT growth in 1QFY26E
Despite all the noise globally and domestically, YTDCY25 and over the last 12 months, the Nifty50 has returned 7.5% and 5% respectively, highlighting investors’ confidence in the India growth story. Further, both FIIs and DIIs have been net buyers in Indian equities over the last 4 months with positive flows of USD 5.6bn and USD 24.0bn respectively. For the JM Financial universe, we forecast PAT growth of 12.8% YoY in 1QFY26E. Ex-BFSI, this number stands at 18.2%. Further, as per JMFL estimates, 1QFY26E Nifty50 PAT is expected to grow 10.4% (14% ex-BFSI). Key contributors are: (1) Telecom, +198% YoY (2) Infra, +130% YoY, (3) Pharma, +14% YoY, (4) Cement, +61% YoY, and (5) Retail, +20% YoY.
* Looking beyond near-term headwinds: YTDCY25, Nifty50 has returned 7.5%, after seeing months of negative returns since Sept’24. Further, despite all the issues globally, over the last 12 months, the Nifty50 has posted a positive 5% return. This indicates that investors, both domestic and foreign, have chosen to see beyond near-term headwinds of geopolitical challenges, uncertain crude outlook and uncertainty on rate cuts by the Fed. Clearly, investors have retained the faith in the India growth story, and economic and relative political/policy stability that India offers.
* Both domestic and foreign flows have been supportive over last 4 months: FIIs were on a selling spree from Oct’24 to Feb’25 selling Indian equities to the tune of USD 25.6bn. Over the last 4 months, FIIs have been net buyers for successive months buying to the tune of USD 5.6bn. In the same period DIIs have to been net buyers to the tune of USD 24.0bn.
* JM Financial universe 1QFY26E PAT growth of 12.8% YoY: For the JM Financial universe, we forecast PAT growth of 12.8% YoY in 1QFY26E. Sectors driving this rise: (1) Oil and Gas (18% weight in earnings) expected to rise 43% YoY, and (2) Pharmaceuticals (4% weight in earnings), expected to rise 30% YoY. Ex-BFSI, the JM Financial universe is expected to register 18.2% YoY growth in 1QFY26 PAT. Ex BFSI and Oil & Gas, this should rise 11% YoY. Sectors with lesser earnings weight but those with the highest PAT growth: Infrastructure (+95% YoY), Sugar (+48% YoY), Cement (+40% YoY), Media (+32% YoY), EMS (+27%) and Healthcare (+22%).
* 1QFY26E Nifty50 PAT set to rise 10.4% YoY: We expect Nifty 1Q PAT to rise 10.4% YoY, led by strong performance in Oil & Gas (EPS growth of 13% YoY and 10% weight in Nifty earnings). Ex BFSI, 1Q Nifty PAT is yet expected to rise at 14%. The weak BFSI performance can be attributed to moderating loan growth, NIM compression of 30bps YoY, weak fee income growth and elevated credit costs. Besides Oil & Gas, key contributors to the growth are (1) Telecom, where PAT should rise 198% YoY and has 5% weight in Nifty earnings, and (2) Infrastructure, where PAT is expected to rise 130% YoY and has 4.6% weight. Sectors that should show decent growth include: (1) Pharmaceuticals (+14% YoY, 3% Nifty Weight), (2) Cement (+61% YoY, 1% Nifty weight) and (3) Consumer Retail (+20% YoY, 1% Nifty weight).
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