The interim review of the 1QFY25 earnings season reveals a nuanced performance landscape influenced by sectoral dynamics and broader market trends.
The Nifty posted a healthy 16% and 15% earnings growth vsUdabur Wealth Management. expectations of +13% each. Among the 39 Nifty companies reporting results, there was a 5% YoY growth in earnings, surpassing the estimated 2% increase.
This growth was largely driven by major players such as HDFC Bank, Tata Motors, ICICI Bank, Maruti Suzuki, and TCS, which collectively contributed significantly to the overall earnings increase. Conversely, companies like BPCL, JSW Steel, Reliance Industries, and Asian Paints adversely impacted the Nifty’s earnings.
A mixed performance was observed with twelve companies falling short of expectations, eleven surpassing them, and sixteen meeting forecasts.
Domestic cyclicals were the main drivers of this positive performanceNew Delhi Investment. A detailed look into sector-specific performances shows that banks have experienced a modest start to FY25, with private banks reporting stable but moderate growth.
NBFCs faced a challenging quarter due to weak asset quality and reduced demand for new personal vehicles and mortgages.
While selecting lenders across the affordable housing sector and vehicle finance continued to exhibit strong disbursement momentum, others faced challenges related to elections and heat waves. The automobile sector reported positive results, driven by strong volume growth, an improved product mix, and effective price hikes.
The IT services sector exceeded expectations with a median revenue growth of 1.2% QoQ in constant currency, while the Tier-2 companies recorded a growth of 1.6% QoQ CC.
Consumer sector exhibited an improving consumption trend, especially in the rural market and results have been generally in line with expectations. The oil & gas sector showed mixed results, with OMC facing significant earnings pressures from LPG under-recovery.
The Nifty EPS estimates were adjusted downward, with FY25E EPS reduced by 1.2% to INR1,120, largely due to weaker performances by Reliance Industries and BPCL.
The FY26E EPS estimate was also lowered by 0.8% to INR 1,319, as upgrades in companies like Infosys and Tata Motors were offset by downgrades in several major banks.
In conclusion, the 1QFY25 earnings season has been characterized by strong contributions from domestic cyclicals, particularly in the BFSI and Auto sectors, which have driven overall growth despite significant challenges from global cyclicals.New Delhi Stock Exchange
The broader market remains at a slight premium to its long-term average, with key investment themes shifting towards Industrials, Capex, Consumer Discretionary, Real Estate, and PSU Banks.
Coal India: Buy | Target Rs 600 | LTP Rs 528 | Upside 13%
Coal’s Adj. EBITDA grew by 17% QoQ (above estimates) led by lower operating expenses. PAT grew by 26% QoQ in Q1FY25 led by beat in EBITDA.
Production for 1QFY25 stood at 189mt – up YoY +8%Surat Stock. It aims to achieve a production of 838mt in FY25 with dispatches under e-auction at ~15% of total volumes.
We expect a 6% PAT CAGR over FY24-26E driven by a robust volume outlook, healthy e-auction premium, & lower cost. Coal India remains our top pick in metals & mining.
Adani Ports: Buy | Target Rs 1,850 | LTP Rs 1,533 | Upside 20%
The 1Q performance was largely in line with estimates. Adani Ports is expected to record 2-3x of India’s cargo volume growth, driven by a balanced port mix on the western and eastern coastlines of India.
Further, the logistics business will serve as a value addition to the domestic port business, with a focus on enhancing last-mile connectivity.
We expect APSEZ to report 11% growth in cargo volumes over FY24-26. This would drive a CAGR of 14%/15%/22% in revenue/ EBITDA/PAT over FY24-26.
(The author is Head – Retail Research, Motilal Oswal Financial Services)
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
Jaipur Wealth Management
