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Informist, Thursday, Jan. 9, 2025

 

By Anshul Choudhary

 

MUMBAI – The December quarter performance of India's biggest companies is likely to show a recovery in earnings growth, but this may still fall below the market's expectations owing to weak demand, lower-than-expected capital expenditure, and a rise in commodity prices for some companies. Earnings growth of companies in the Nifty 50 index for the quarter is likely to fall short of the market's expectation of mid-teens growth.

 

The cumulative net profit of 48 companies in the benchmark index is expected to have risen 10% on year during the December quarter, according to an Informist poll of 22 brokerages. Adani Enterprises Ltd. and Bajaj Finserv Ltd. were not considered in this poll as there were not enough analyst estimates available for these stocks. The net profit growth of 10% is higher than the 4% growth seen in the first half of the financial year. At the same time, the cumulative revenue of these companies is likely to have risen by 6% on year.

 

Analysts said sales growth is largely muted owing to weak demand in the economy. "Demand from a large section of the middle class is weak given the poor growth in household income... government spending has been lacklustre," Dhananjay Sinha, head of research at Systematix Group, said. Market participants had expected higher capital expenditure from the government starting October, considering that it had cut spending due to the general election in the first quarter of the financial year 2024-25 (Apr-Mar). However, there has not been a significant and sustained pick-up in government spending so far, which was confirmed by the first advance estimate for GDP released by the government Tuesday.

 

The government expects GDP to grow 6.4% in FY25, which implies a slight improvement from the 6% rise in the first six months of the financial year. Analysts said the GDP figures do not show a significant rise in spending from the government as well as from private players. Considering the underwhelming pace of spending, analysts said there is a risk even to this GDP advance estimate. Nomura expects the GDP growth figure for the full year to be revised down to around 6%.

 

Companies may continue to enjoy the benefits of high margins in December. However, analysts said margins are at peak levels and there is limited scope for a further increase. Motilal Oswal Financial Services expects the earnings before interest, taxes, depreciation, and amortisation margin of Nifty 50 companies to rise 30 basis points to 20.2% during the quarter.

 

Companies struggling to raise prices are likely to report poor earnings growth in the quarter. These companies include metal, cement, and paint manufacturers. Further, profits of major fast-moving consumer goods companies are expected to decline owing to a rise in commodity prices. At the same time, sectors such as industrials, retail, and telecommunications may report good earnings growth. On a sequential basis, the cumulative revenue and net profit of these 48 top companies are seen rising 4% during the December quarter. Tata Consultancy Services Ltd. is set to kick off the earnings season for Nifty 50 companies Thursday.

 

DOWNGRADE RISK

Analysts said the slowdown in India's economic growth could mean earnings growth remaining subdued for a few more quarters. This has somewhat dawned on the markets after the weak earnings growth in the September quarter, but expectations are still high and one can see further downgrades if earnings in this quarter are also disappointing, analysts said. 

 

"The more worrying aspect is that a slowdown in earnings is now being led by demand rather than external/liquidity shock. Hence, reversing the same shall need a significant policy response, which at present is not on the anvil," Nuvama Institutional Equities said in its earnings preview report. The brokerage has a more conservative view on earnings growth and expects the Nifty 50 earnings to rise only 2% this quarter. If earnings growth drops to this level, Nuvama expects the market consensus of earnings growth of mid-teens during the second half of the financial year will risk being downgraded.

 

Considering the estimates for the December quarter, Motilal Oswal Financial Services has already cut its estimates of earnings per share for the Nifty 50 companies. It has marginally cut its EPS estimate for FY25 to INR 1,050 and for FY26 to INR 1,220.

SECTORAL TRENDS

The financial services sector, which has a nearly 35% weightage in the Nifty 50 index, is seen weak this quarter. Banks, excluding the State Bank of India, are expected to report muted growth in net profit due to higher credit costs and moderation in loan growth.

 

"For our coverage universe banks that have reported their provisional numbers so far, we have seen deposit momentum come off on a sequential basis," Axis Securities said in a note. The brokerage said the slower pace of growth in loans is largely due to a slowdown in unsecured loans. The cumulative net interest income of six banks in the Nifty 50 is likely to grow 8% on year while net profit is likely to rise 17%. However, excluding SBI, the cumulative net profit may grow by only 3% on year.

 

Sales growth for information technology companies, which account for over 14% weightage in the Nifty 50 index, is likely to be muted due to seasonal factors such as furloughs. Further, margins may contract for some companies due to wage hikes, while a stronger dollar may aid earnings. Analysts expect a modest improvement in discretionary spending in the quarter and deal flow is likely to be similar to the September quarter.

 

The cumulative sales of five IT companies in the Nifty 50 index is expected to rise a mere 1% on quarter, while net profit is seen 3% higher. HCL Technologies is likely to outperform its peers with a sales growth of 4%, but sales growth is seen flat for Infosys, Tata Consultancy Services, Tech Mahindra, and Wipro. Compared with the previous year, these companies' cumulative net sales are expected to rise 5% and net profit is expected to rise 13%.

 

The FMCG companies are expected to face challenges due to dwindling urban demand, even as demand from rural areas is expected to show slight improvement. In another setback, commodity prices increased during the quarter and companies' quarterly updates showed they had to raise product prices to offset the negative effect of higher costs. Higher prices of products are likely to hurt FMCG companies' volume growth during the quarter.

 

"We expect moderation in volume growth...(FMCG) companies may see volume growth of low- to mid-single digit in the quarter (Oct-Dec)," Amit Agarwal, senior vice-president of fundamental research at Kotak Securities, said after several companies in the sector reported their quarterly updates last week. 

 

The cumulative net profit of five FMCG companies in the Nifty 50 may decline 3% on year and on quarter. Their sales are likely to grow 4% on year but decline 5% on quarter. Tata Consumer Products is likely to outperform the bunch. Its sales are seen 16% higher on year and net profit is likely to grow 17%.

 

Steelmakers are likely to struggle on account of weak prices, with Tata Steel expected to post a net loss in the December quarter and the net profit of JSW Steel expected to fall 77% on year. The outlook for Hindalco Industries is much better and the company is expected to report a 71% rise in net profit, driven by an improvement in aluminium prices.

 

Earnings growth of automobile companies is seen mixed on account of moderation in demand for major two-wheeler companies, except for Royal Enfield-maker Eicher Motors. Analysts said the festival season failed to revive demand for two-wheelers, but passenger vehicles saw some improvement driven by discounts. "In 3QFY25 (Oct-Dec), we have further cut estimates for 7 out of 26 companies, with no material upgrades, as we remain cautious on the prospects of a meaningful demand recovery across segments," Motilal Oswal Financial Services said in its earnings preview report.

 

The cumulative net profit of six automobile companies in the Nifty 50 index is likely to rise 6% on year and sales may grow 10%. Sequentially, the net profit may rise 21% and sales are likely to grow 10%. Two-wheeler companies Bajaj Auto and Hero MotoCorp are likely to report mid-single digit growth in net profit, while Eicher Motors may see its net profit expand by 17%. Mahindra & Mahindra is likely to outperform the bunch with expectations of 26% growth in net profit for the quarter.

 

The earnings of pharmaceutical companies are likely to be driven by higher margins and strong demand for formulations in India. The cumulative net profit of three pharmaceutical companies in the Nifty 50 index is likely to rise 8% on year and sales may rise 9%. Within hospitals, Apollo Hospitals Enterprise is likely to report 41% growth in net profit on 14% rise in sales.

 

Strong earnings by other large-caps have aided the overall earnings growth. Among these, Bharti Airtel is likely to double its net profit and sales may rise 16% on year. Larsen & Toubro is likely to report 23% growth in net profit and 20% rise in sales. Trent, the owner of Westside and Zudio brands, may report another strong quarter with 58% growth in net profit on sales growth of 40%. Bharat Petroleum Corp. is likely to see a 54% rise in net profit, but its sales may fall nearly 10%.

 

Following are the Oct-Dec consensus earnings estimates of companies that constitute the National Stock Exchange's Nifty 50 index. These estimates are based on reports compiled by Informist Media from 22 brokerages.

 

Company name	Sales, INR million	PAT, INR million	Sales Y-o-Y Change %	PAT Y-o-Y Change %	Sales Q-o-Q Change %	PAT Q-o-Q Change %	EBITDA, INR million	Result date	Number of estimates available
AUTO
Bajaj Auto	129,677	21,653	7.05	6.04	(1.22)	7.99	26,022	Jan. 28	10
Eicher Motors +	50,407	11,664	20.62	17.11	18.24	6.01	13,199	--	9
Hero MotoCorp	101,118	11,195	3.99	4.30	(3.36)	(6.98)	14,270	--	8
M&M	308,856	30,911	20.45	25.96	6.80	(19.52)	44,633	--	6
Maruti Suzuki	388,266	36,368	16.57	16.19	4.36	18.49	45,283	--	9
Tata Motors +	1,163,443	65,055	5.22	(7.40)	14.68	94.60	156,186	Jan. 29	9
Total	2,141,766	176,845	9.53	5.77	9.59	21.44
Company name	Sales, INR million	PAT, INR million	Sales Y-o-Y Change %	PAT Y-o-Y Change %	Sales Q-o-Q Change %	PAT Q-o-Q Change %	EBITDA, INR million	Result date	Number of estimates available
BANK
AXIS Bank *	137,786	63,958	9.95	5.35	2.19	(7.54)	N.A.	Jan. 16	11
HDFC Bank *	306,644	166,932	7.70	1.96	1.83	(0.76)	N.A.	Jan. 22	12
ICICI Bank *	205,992	114,054	10.28	11.04	2.75	(2.90)	N.A.	Jan. 25	12
IndusInd Bank*	53,690	12,957	1.39	(43.61)	0.41	(2.25)	N.A.	--	10
Kotak Mahindra *	71,690	33,469	9.39	11.38	2.13	0.10	N.A.	Jan. 18	10
SBI *	424,706	161,117	6.67	75.82	2.04	(12.11)	N.A.	--	8
Total	1,200,509	552,487	7.82	17.10	2.06	(5.53)
Company name	Sales, INR million	PAT, INR million	Sales Y-o-Y Change %	PAT Y-o-Y Change %	Sales Q-o-Q Change %	PAT Q-o-Q Change %	EBITDA, INR million	Result date	Number of estimates available
CEMENT
Grasim Industries	81,715	(79)	27.67	N.A.	7.19	N.A.	4,547	--	3
UltraTech Cement +	168,088	13,049	0.41	(26.57)	7.51	59.12	27,287	Jan. 23	10
Total	249,803	12,970	7.95	(35.58)	7.40	(15.83)
Company name	Sales, INR million	PAT, INR million	Sales Y-o-Y Change %	PAT Y-o-Y Change %	Sales Q-o-Q Change %	PAT Q-o-Q Change %	EBITDA, INR million	Result date	Number of estimates available
CHEMICAL
Asian Paints +	88,288	11,105	(3.01)	(23.29)	9.98	59.86	16,230	Feb. 4	13
Total	88,288	11,105	(3.01)	(23.29)	9.98	59.86
Company name	Sales, INR million	PAT, INR million	Sales Y-o-Y Change %	PAT Y-o-Y Change %	Sales Q-o-Q Change %	PAT Q-o-Q Change %	EBITDA, INR million	Result date	Number of estimates available
DIVERSIFIED
Adani Enterprises +	N.A.	N.A.	N.A.	N.A.	N.A.	N.A.	N.A.	--	--
Total	N.A.	N.A.	N.A.	N.A.	N.A.	N.A.
Company name	Sales, INR million	PAT, INR million	Sales Y-o-Y Change %	PAT Y-o-Y Change %	Sales Q-o-Q Change %	PAT Q-o-Q Change %	EBITDA, INR million	Result date	Number of estimates available
ENGINEERING - CAPITAL GOODS
L&T +	658,839	36,387	19.51	23.46	7.03	7.17	65,905	--	4
Total	658,839	36,387	19.51	23.46	7.03	7.17
Company name	Sales, INR million	PAT, INR million	Sales Y-o-Y Change %	PAT Y-o-Y Change %	Sales Q-o-Q Change %	PAT Q-o-Q Change %	EBITDA, INR million	Result date	Number of estimates available
FINANCE
Bajaj Finance +*	96,165	41,925	25.62	15.21	8.81	4.82	N.A.	Jan. 29	6
Bajaj Finserv +*	N.A.	N.A.	N.A.	N.A.	N.A.	N.A.	N.A.	Jan. 30	--
HDFC Life Insurance Co#	180,909	4,418	18.74	21.02	9.18	2.03	N.A.	Jan. 15	2
SBI Life Insurance Co#	258,978	5,022	16.05	56.08	27.79	(5.14)	N.A.	Jan. 17	1
Shriram Finance*	56,683	22,761	15.42	25.18	3.74	9.89	N.A.	--	7
Total	592,734	74,126	18.27	20.65	15.91	5.39
Company name	Sales, INR million	PAT, INR million	Sales Y-o-Y Change %	PAT Y-o-Y Change %	Sales Q-o-Q Change %	PAT Q-o-Q Change %	EBITDA, INR million	Result date	Number of estimates available
FMCG
Britannia Industries +	44,790	5,156	5.23	(7.34)	(4.04)	(2.99)	7,710	--	15
Hindustan Unilever	156,071	25,700	2.76	2.02	0.64	(1.61)	36,071	--	15
ITC	182,019	51,425	3.12	(7.71)	(11.37)	1.26	62,869	--	15
Nestle India	48,096	7,113	4.55	8.50	(5.77)	(27.88)	10,103	Jan. 31	13
Tata Consumer Product +	44,053	3,259	15.81	16.86	4.53	(10.58)	5,725	--	10
Total	475,029	92,653	4.40	(3.30)	(5.05)	(3.21)
Company name	Sales, INR million	PAT, INR million	Sales Y-o-Y Change %	PAT Y-o-Y Change %	Sales Q-o-Q Change %	PAT Q-o-Q Change %	EBITDA, INR million	Result date	Number of estimates available
HEALTHCARE
Apollo Hospitals Enterprise +	55,139	3,464	13.67	41.21	(1.35)	(8.55)	7,614	--	4
Total	55,139	3,464	13.67	41.21	(1.35)	(8.55)
Company name	Sales, INR million	PAT, INR million	Sales Y-o-Y Change %	PAT Y-o-Y Change %	Sales Q-o-Q Change %	PAT Q-o-Q Change %	EBITDA, INR million	Result date	Number of estimates available
IT
HCL Tech +	299,908	45,490	5.43	4.58	3.91	7.41	69,284	Jan. 13	14
Infosys +	412,356	67,373	6.22	10.34	0.61	3.56	99,500	Jan. 16	14
TCS +	644,729	124,091	6.42	12.22	0.33	4.20	170,555	Jan. 9	14
Tech Mahindra +	133,739	10,666	2.08	108.97	0.46	(14.68)	17,847	Jan. 17	14
Wipro +	222,289	30,670	0.11	13.84	(0.33)	(4.42)	44,740	Jan. 17	14
Total	1,713,021	278,291	4.99	12.58	0.93	2.66
Company name	Sales, INR million	PAT, INR million	Sales Y-o-Y Change %	PAT Y-o-Y Change %	Sales Q-o-Q Change %	PAT Q-o-Q Change %	EBITDA, INR million	Result date	Number of estimates available
JEWELLERY
Titan Co	167,991	11,215	28.71	7.84	27.12	59.08	17,490	--	6
Total	167,991	11,215	28.71	7.84	27.12	59.08
Company name	Sales, INR million	PAT, INR million	Sales Y-o-Y Change %	PAT Y-o-Y Change %	Sales Q-o-Q Change %	PAT Q-o-Q Change %	EBITDA, INR million	Result date	Number of estimates available
METAL
Hindalco Industries +	590,173	39,809	11.76	70.78	1.40	1.84	78,112	Feb. 13	5
JSW Steel +	407,621	5,609	(2.81)	(76.77)	2.72	27.77	50,792	Jan. 24	5
Tata Steel +	524,485	(4,151)	(5.18)	N.A.	(2.70)	N.A.	47,362	--	6
Total	1,522,278	41,267	1.44	(21.54)	0.29	(20.36)
Company name	Sales, INR million	PAT, INR million	Sales Y-o-Y Change %	PAT Y-o-Y Change %	Sales Q-o-Q Change %	PAT Q-o-Q Change %	EBITDA, INR million	Result date	Number of estimates available
OIL & GAS
BPCL	1,033,959	52,317	(10.48)	54.00	0.59	118.24	85,499	--	8
ONGC	321,639	97,845	(7.54)	(1.08)	(5.07)	(18.35)	179,823	--	8
Reliance Ind +	2,379,250	181,564	5.70	5.16	2.76	9.62	416,169	--	8
Total	3,734,849	331,725	(0.50)	8.57	1.43	7.20
Company name	Sales, INR million	PAT, INR million	Sales Y-o-Y Change %	PAT Y-o-Y Change %	Sales Q-o-Q Change %	PAT Q-o-Q Change %	EBITDA, INR million	Result date	Number of estimates available
PHARMA
Cipla +	69,717	12,055	5.57	14.17	(1.13)	(7.45)	17,726	Jan. 28	7
Dr. Reddy's Lab +	81,990	12,649	13.30	(8.40)	2.00	0.73	22,648	Jan. 23	7
Sun Pharma +	134,593	28,686	8.71	13.66	1.26	(5.64)	37,031	--	6
Total	286,299	53,390	9.19	7.63	0.88	(4.63)
Company name	Sales, INR million	PAT, INR million	Sales Y-o-Y Change %	PAT Y-o-Y Change %	Sales Q-o-Q Change %	PAT Q-o-Q Change %	EBITDA, INR million	Result date	Number of estimates available
POWER & ENERGY
Bharat Electronics	48,238	9,663	16.61	8.17	5.24	(11.45)	12,410	--	5
Coal India +	363,730	87,095	0.61	(14.02)	18.58	38.48	115,636	--	4
NTPC	413,337	48,941	4.76	7.05	2.50	5.27	112,808	--	5
Power Grid	113,727	40,220	6.52	1.30	10.84	8.38	101,155	--	5
Total	939,032	185,918	3.85	(4.98)	9.39	18.12
Company name	Sales, INR million	PAT, INR million	Sales Y-o-Y Change %	PAT Y-o-Y Change %	Sales Q-o-Q Change %	PAT Q-o-Q Change %	EBITDA, INR million	Result date	Number of estimates available
TELECOM
Bharti Airtel +	439,819	49,993	16.05	104.71	6.05	39.13	225,335	--	6
Total	439,819	49,993	16.05	104.71	6.05	39.13
Company name	Sales, INR million	PAT, INR million	Sales Y-o-Y Change %	PAT Y-o-Y Change %	Sales Q-o-Q Change %	PAT Q-o-Q Change %	EBITDA, INR million	Result date	Number of estimates available
PORTS
Adani Ports and SEZ +	73,289	25,926	5.91	17.40	3.70	6.04	44,515	--	4
Total	73,289	25,926	5.91	17.40	3.70	6.04
Company name	Sales, INR million	PAT, INR million	Sales Y-o-Y Change %	PAT Y-o-Y Change %	Sales Q-o-Q Change %	PAT Q-o-Q Change %	EBITDA, INR million	Result date	Number of estimates available
RETAIL
Trent	46,405	5,436	40.09	58.20	14.99	28.37	8,677	--	5
Total	46,405	5,436	40.09	58.20	14.99	28.37
Company name	Sales, INR million	PAT, INR million	Sales Y-o-Y Change %	PAT Y-o-Y Change %	Sales Q-o-Q Change %	PAT Q-o-Q Change %	EBITDA, INR million	Result date	Number of estimates available
Nifty Total	14,385,089	1,943,199	5.68	9.55	4.06	3.69

 

Notes:

+ Consolidated Figure

* Net interest Income

Y-o-Y: Year-on-Year

# Net premium income

Q-o-Q: Quarter-on-Quarter

N.A.: Not Available

 

Estimates from:

Axis Securities Ltd, Centrum Broking Ltd, Dolat Capital Market Pvt Ltd, Elara Securities (India) Pvt Ltd, Emkay Global Financial Services Ltd, HDFC Securities Ltd, HSBC Global Research, ICICI Securities Ltd, IDBI Capital Market Services Ltd, Indsec Securities and Finance Ltd, JM Financial Institutional Securities Pvt Ltd, Kotak Institutional Equities, KR Choksey Research, Motilal Oswal Financial Services Ltd, Nirmal Bang Equities Pvt Ltd, Nomura Equity Research, Nuvama Wealth Management Ltd, PhillipCapital (India) Pvt Ltd, Prabhudas Lilladher Pvt Ltd, Sharekhan Ltd, Systematix Shares and Stocks (India) Ltd and YES Securities (India) Ltd.

 

End

 

Compiled by Shivaji Jagatap

Edited by Rajeev Pai

 

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