Q4 Results Review: 5 cos including HDFC Bank, TCS contribute 75% to Nifty earnings growth; see top upgrades, downgrades
Earnings for Q4FY24 have been as expected, driven by domestic cyclicals like BFSI and auto, while O&G and metal sectors lag. 28 companies from the Nifty50 index have announced their 4QFY24 results, with HDFC Bank, Coal India, ICICI Bank, Maruti Suzuki, and TCS leading the growth.
The earnings for the March quarter (Q4FY24) so far have been in line with estimates for the most part. Once again the earnings growth was propelled by domestic cyclicals, such as BFSI (bank, financial services, and insurance) and auto while oil & gas and metal sectors continued to drag, according to the interim earnings review report by domestic brokerage house Motilal Oswal (MOSL).
As of May 4, 2024, 28 companies from the Nifty50 index have announced their 4QFY24 results. These companies constitute: a) 62 percent of the estimated PAT for the Nifty Universe; b) 46 percent of India's market capitalisation; and c) 66 percent weightage in the Nifty, informed the report. For the 28 Nifty companies, earnings grew 13 percent vs expectations of 8 percent, it noted.
Read here: Dr Reddy's share price falls 5% post Q4 results: Should you Buy, Hold or Sell?
The brokerage highlighted that the rise in earnings till now has been propelled by HDFC Bank, Coal India, ICICI Bank, Maruti Suzuki, and TCS. These five companies contributed 75 percent to the incremental YoY accretion in earnings. Conversely, Tech Mahindra, Reliance Industries, and Wipro contributed adversely to Nifty earnings, it stated.
As of May 4, 2024, 28 Nifty stocks posted notable growth across key financial metrics, surpassing initial estimates. These companies reported a year-over-year (YoY) increase in sales, EBITDA, profit before tax (PBT), and profit after tax (PAT) of 10%, 15%, 11%, and 13%, respectively. These figures were against expectations of 13%, 9%, 10%, and 8%, indicating strong performance within these companies.
Read here: JSW Energy share price up 125% in 1 year; should you buy stock after Q4 result?
Beat/Missed Expectations
Furthermore, MOSL pointed out that only five companies within the Nifty reported profits below expectations, while 10 recorded a beat, and 13 registered in-line results so far.
Among the Nifty constituents, companies including Reliance Industries, HDFC Bank, Coal India, Axis Bank, Kotak Mahindra Bank, Ultratech Cement, Bajaj Auto, Tech Mahindra, Nestle, and SBI Life Insurance exceeded profit estimates. Conversely, HCL Technologies, LTIMindtree, Titan, and HDFC Life Insurance missed profit estimates for Q4FY24.
Read here: Q4 Results Impact: IGL stock jumps 7% after PAT rises 9% in March quarter
Nifty EPS stable: MOSL's Nifty EPS estimates for FY25/FY26 have been stable so far at ₹1,133/ ₹1,315 (vs ₹1,132/ ₹1,317).
Sector Overview
The brokerage noted that the earnings growth was fueled by the domestic cyclicals, such as BFSI and Auto, as expected. BFSI clocked a 22 percent YoY growth, while Auto reported a growth of 38 percent YoY (in line with an estimate of +38 percent), driven by Maruti Suzuki and Bajaj Auto.
In contrast, the aggregate performance has been dragged down by the O&G sector, which posted a 20 percent earnings decline (IOCL’s profit plunged 52 percent YoY). Excluding Metals and O&G, the Nifty has recorded a 15 percent YoY earnings growth (vs estimate of +12 percent), said the brokerage. The Cement sector also reported a healthy growth of 33 percent YoY (vs estimate of +25 percent YoY).
Read here: Voltas shares drop over 9% on weak Q4 results; should you still buy?
Sectorwise
Banks: Earnings growth for private banks has remained healthy, with Axis Bank, Kotak Bank, and RBL Bank reporting better-than-expected earnings. However, HDFC Bank, Axis Bank, Kotak Bank, Federal Bank, ICICI Bank, IDFC First Bank, and IndusInd Bank registered a mixed margin performance. The overall pace of NIM compression has moderated, even though funding costs continue to inch up.
NBFCs – Lending: Most vehicle financiers have reported that the demand momentum in the vehicle segment, especially in CV, has been subdued because of the ongoing elections. Most of the NBFCs have reported a stable CoB or a decline.
Automobiles: The Q4FY24 results so far have been in line. The growth has largely been driven by: a) healthy volume growth across most of the segments, ex-CVs, b) better product mix, c) lower commodity costs, and d) operating leverage. MOSL believes that margin pressures will persist in the upcoming quarters due to the expected recurrence of certain costs.
Read here: IT stocks attractive after correction, recovery hopes pushed back to FY26: Kotak
Technology: The Q4FY24 results for Tier-1 companies have remained weak so far due to lower-than-expected growth, weak demand, and the re-scope of contracts, as well as project cancellations. Discretionary spending shows no signs of picking up, and the near-term outlook remains bleak. The guidance for FY25 came in lower than expected, even with muted expectations.
Consumer: The Q4FY24 results thus far have been in line. While consumption has been improving, staple demand trends have remained largely similar to those seen in Q3FY24, with a marginal increase in volumes on a YoY basis. The impact of the price cuts will settle down in H1FY25 for most of the commodity-sensitive categories, and H2FY25 may see price hikes.
Oil & Gas: The sector has reported mixed 4QFY24 results so far. RIL beat MOSL's estimates primarily due to a strong O2C performance, while IOCL fell short of its earnings estimates owing to a weaker-than-estimated refining margin
Read here: Hindustan Petroleum Q4 results: Board to consider bonus equity share
Upgrades/Downgrades
Top FY25E upgrades: Coal India (15%), Axis Bank (3.8%), Maruti Suzuki (2%), Bajaj Auto (1.3%), and HDFC Bank (1.2%).
Top FY25E downgrades: Bajaj Finance (-7.8%), HCL Tech (-6.7%), LTI Mindtree (-6%), Titan (-5.7%), and Infosys (-5.7%).
View
The corporate earnings scorecard for Q4FY24 has been in line so far, with heavyweights such as HDFC Bank, Coal India, ICICI Bank, Maruti Suzuki, and TCS driving the aggregate. However, growth has primarily been led by the BFSI and automobile sectors. Nifty is trading at a 12-month forward P/E of 19.3x, at a 5 percent discount to its own long-period average (LPA), said MOSL.
Read here: Kotak Bank's rollercoaster: From setbacks to a surging Q4
Its model portfolio remains aligned with the key domestic cyclical themes amid a consistent backdrop of earnings growth. MOSL remains Overweight on Financials, Consumption, Industrials and Real Estate. Industrials, Consumer Discretionary, Real Estate, and PSU Banks are its key preferred investment themes.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
- Top Gainers
- Top Losers
- 52 Week High