Q3 earnings review: Nifty 50 beats estimates, says Motilal Oswal, lists top earnings upgrades and downgrades

Domestic cyclical such as autos and financials, along with global cyclical (i.e., metals and Oil & Gas) drove the beat. Technology posted a marginal decline in earnings, its first in 26 quarters, the brokerage firm added.

Nifty 50 delivered a strong beat with a 17 per cent year-on-year (YoY) PAT growth (versus the estimates of +11 per cent). Five Nifty companies – Tata Motors, HDFC Bank, Tata Steel, ICICI Bank, and JSW Steel – contributed 56 per cent of the incremental YoY accretion in earnings, Motilal Oswal observed.

“The Nifty universes delivered 26 per cent YoY earnings growth in the nine months of the financial year 2024 (9MFY24). For Q4FY24, we expect Nifty earnings to report a growth of 5 per cent YoY,” Motilal Oswal said.

“Our Nifty EPS estimates for FY24 and FY25 have remained unchanged at ₹975 and ₹1,142, respectively. We now expect the Nifty EPS to grow about 21 per cent and 17 per cent YoY in FY24 and FY25 respectively,” said the brokerage firm.

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According to the brokerage firm, the top earnings upgrades in FY25E are Tata Motors (+26 per cent), Coal India (+10 per cent), Hero MotoCorp (+10 per cent), Cipla (+8 per cent), and Bharti Airtel (+7 per cent) while the top earnings downgrades in FY25E are UPL (-23 per cent), LTIMindtree (-8 per cent), ITC (-6 per cent), Divis Labs (-5 per cent) and and HUL (-5 per cent).

Sectoral highlights

Technology: The IT services companies (within MOFSL Universe) exhibited a median revenue growth of 1 per cent QoQ in CC (constant currency). With continued weakness in key verticals and pressure on Q4 execution, the companies have either narrowed their revenue guidance band or expect to achieve the lower end of the range. Throughout Q3FY24, softness persisted in key verticals and geographies, with BFSI, consumer, and communications reporting muted growth, said the brokerage firm.

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Banks: The banking sector exhibited a mixed performance in Q3FY24, characterised by healthy business growth, controlled provisions, persistent NIM pressure, and high operational expenditure, according to the brokerage firm. Credit growth was primarily driven by retail growth. The corporate sector saw a gradual pickup, aided by MSME growth. Most of the banks witnessed stagnant or a slight dip in margins, barring select PSU banks.

Autos: In Q3FY24, auto volumes (ex-tractors) grew 16 per cent YoY (flat QoQ) led by a healthy recovery in 2Ws (two-wheelers), stable growth across other segments, and a lower base due to the festive mismatch. 2Ws witnessed the sharpest growth of nearly 19 per cent YoY during the quarter, Motilal Oswal pointed out.

Consumer: The consumption trend and management commentary about rural recovery remained unchanged in Q3. Local competition, a delayed rural recovery, and price cuts continued to hurt revenue performance during 9MFY24 (4 per cent revenue growth). Volume growth improved a bit sequentially, but revenue growth was muted due to price cuts,” said the brokerage firm.

Disclaimer: The article is based on a Motilal Oswal Financial Services report. The views and recommendations above are those of the broking firm, not of Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 16 Feb 2024, 05:08 PM IST