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Informist, Monday, Apr. 7, 2025

 

--Nuvama: See Nifty 50 EPS in Jan-Mar to rise 2% on yr; FY25 EPS may rise 6% 

--Nuvama: Weak FY25 amid global uncertainties a risk to FY26 EPS estimates 

--Nuvama: Stock valuations are not cheap amid weak earnings, high rates 

 

MUMBAI – The earnings per share of Nifty 50 companies will likely grow just 2% on year for the March quarter, resulting in a 6?rnings per share growth for 2024-25 (Apr-Mar), Nuvama Institutional Equities said in a report Friday. This is much lower than the brokerage's earlier estimate of 8% growth for FY25. An expected weak ending of the previous financial year amid increasing global uncertainties due to reciprocal tariffs by the US has put the 13% EPS growth expectation of FY26 under risk, the brokerage said. 

 

Although tariffs are expected to have only a limited direct impact on Indian companies, the indirect impact could be sweeping as nearly two-thirds of the top line of Nifty 50 companies are linked to global trade, Nuvama said. The brokerage said it is cautious of the valuation of the stocks given expectations of weaker earnings and higher rates. 

 

The March quarter will likely be the eighth straight quarter of sub-10% top line growth for the companies covered by Nuvama, excluding oil marketing companies, it said. These companies are expected to post a 6% on-year growth in their top line during the March quarter, which is lower than the 8% growth seen in the previous quarter.

 

Companies in the electronics manufacturing services, internet, non-banking financial services, quick-service restaurants, and consumer services sectors are expected to post an over 15% top line growth for the March quarter. On the other hand, information technology companies, banks, metal companies, energy companies, paint companies, and cement companies would likely see a sub-10% growth in their revenues in Jan-Mar, Nuvama said. Sectors such as durables, fast-moving consumer goods, pharmaceuticals, retail, industrials, and non-lending financials will post a 10-15% top line growth.

 

The net profit of these companies, on the other hand, is seen up just 1% due to a rise in depreciation and interest, the brokerage said. The 1% growth is much lower than the 4% growth recorded in the December quarter and the over 20% growth expected in FY24, Nuvama added. Profits are likely to be weak for the energy, cement, BFSI (banking, financial services and insurance), FMCG, and industrials sectors, whereas chemicals, quick service restaurants and telecom will likely post strong profit growth.

 

Consumer services companies might see a 7% upward revision in their earnings estimate for FY25 if their March quarter estimates fall in line, Nuvama said. However, FMCG, metals and mining, and energy companies, excluding oil marketing companies, might see a 4%, 5%, and 8% cut in their FY25 earnings estimates if the fourth quarter estimates come out to be true, the brokerage said.

 

Automobile companies that the brokerage covers, excluding Tata Motors Ltd., are likely to post a 10% revenue and earnings before interest, taxes, depreciation and amortisation growth for the March quarter. TVS Motors Ltd., Mahindra and Mahindra Ltd., Eicher Motors Ltd., Ashok Leyland Ltd., and Samvardhana Motherson International Ltd. will likely see strong profitability during Jan-Mar, Nuvama said. On the other hand, tyre and battery companies, Tata Motors, Sona BLW Precision Forgings Ltd., and Bharat Forge Ltd. will likely see subdued profitability, it added.

 

Earnings estimate of cement companies for FY26 and FY27 are unlikely to see any material upgrade as prices are expected to have bottomed out and no substantial price hikes are expecetd in the current financial year due to elevated competitive intensity, Nuvama said. For the March quarter, the cement companies under its coverage are expected to clock nearly 10% on-year growth in its volume on the back of a rise in government spending, the brokerage added. 

 

Cement companies would have likely seen a 6-7% sequential fall in realisations during the March quarter, resulting in a 1.5% on-year fall in EBITDA. Their margins are also expected to contract 200 basis points on year, with the steepest fall expected for Shree Cements Ltd. and ACC Ltd. of 350 bps and 340 bps, respectively.

 

The infrastructure companies under its coverage are expected to post a 6% on-year fall in top line and their EBITDA margin is likely to contract 30 bps, Nuvama said. "Companies with strong order books and healthy balance sheets are likely to deliver a relatively sound performance," it said, adding that it expects select companies such as NCC Ltd. to post an improved revenue growth in FY26. 

 

IT companies, on the other hand, will likely put up a mixed show with large-cap companies posting a sequential fall in revenue, whereas mid-caps delivering strong organic growth of up to 4% during the March quarter. Their margins are expected to be stable with a slight improvement for most of the companies, Nuvama said.

 

While the brokerage is positive on the IT sector for medium to long term, it is cautious on the sector for the near term. However, it has cut its earnings estimates and target prices of these companies. Tariff-led uncertanties might reflect in the commentary and guidance by these companies, Nuvama said.

 

The consumer staples sector's revenue, EBITDA, and volume are expected to grow 9%, 3%, and 4% on year during the March quarter, respectively. The brokerage said slowdown in the urban space is expected to continue in the first half of the current financial year, but demand in the rural market will likely recover on the back of likely strong monsoons.  End

 

Reported by Aman Aryan

Edited by Tanima BAnerjee

 

 

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