Most Companies Beat Q4 Earnings Estimates, Say Top Brokerages
The aggregate March quarter earnings of 127 companies analysed by Nomura rose 8% YoY and were 4% above the Bloomberg estimates.
Indian corporate earnings recorded healthy growth, with many beating street estimates in the quarter ended March 2023, according to Nomura and Jefferies.
The aggregate March quarter earnings of 127 companies analysed by Nomura rose 8% year-on-year and were 4% above the Bloomberg consensus estimates, Nomura said. Net earnings grew 13.3% year-on-year after adjusting for extraordinaries and were 11.8% ahead of the estimates, it said.
The companies Jefferies covered during the March quarter, excluding metals and oil and gas, reported 25% year-on-year earnings growth, the brokerage said.
Domestic companies, excluding oil and gas, metals, and exporters, posted 30% year-on-year growth in earnings, according to Jefferies. Revenue and Ebitda in the analysed universe grew by 16% and 18% year-on-year, respectively.
"Domestic companies' earnings rose ... margins rose year-on-year, and revenue growth remained at mid-teen," Jefferies said.
Aggregate Ebitda grew at a slower pace at 5.7% year-on-year but still managed to beat consensus estimates by 2.7%, according to Nomura. The brokerage reported Ebitda growth lagging revenue growth at 11.5% for this group of companies, as Ebitda margin declined annually across most commodity-consuming sectors, except autos and real estate.
Sectoral Peformance
Oil and gas and financials contributed the most to the aggregate earnings among companies analysed by Nomura, on the back of high refining and marketing margins, net interest margin expansion, and low credit costs.
Sales—excluding metals, oil and gas, and financials—recorded 16.7% growth year-on-year, Nomura said, while volume growth across many consumption segments remained weak.
Banks and lenders saw earnings growth of 46%, with upgrades of 3–7% for Axis Bank Ltd., ICICI Bank Ltd., State Bank of India, Kotak Mahindra Bank Ltd., and IndusInd Bank Ltd., Jefferies said. The net interest margin and continuing good credit quality were the driving forces behind the upgrades.
Auto OEM results were strong, with several companies reporting record Ebitda, Jefferies said.
IT companies reported significant revenue misses and weak single-digit growth guidance for FY24 revenues during the March quarter amid unfavourable industry conditions. Consumer discretionary companies saw a mixed trend as rising inflation impacted consumption.
Expectations For Coming Fiscals
After earnings growth of 8.8% in the previous fiscal, markets are currently factoring in 21% earnings growth in the current fiscal and 14.5% in fiscal 2025 for the Nifty 100 universe, Nomura said.
Financials, autos, and oil and gas are the key drivers of aggregate earnings, accounting for 55% of the incremental earnings over fiscal 2023 to 2025, the Nomura report said. The profitability metrics are close to historical highs across many sectors, as per current estimates, it said.
"A possible cyclical slowdown could present a risk to fiscal 2025 earnings estimates. A deeper-than-estimated slowdown could adversely impact aggregate earnings by approximately 15%, driven largely by commodities and discretionary segments," Nomura said.
