Corporate earnings for the September quarter are expected to grow at a fast clip, driven by good performances by oil marketing companies (OMCs), automobile manufacturers, banks, capital goods and cement makers, and metals producers.
The numbers should be seen against the backdrop of a weak base of the year-ago period. Moreover, the results will be appear a lot more subdued if the OMCs are excluded because they reported a loss in the base quarter.
Kotak Institutional Equities (KIE) estimates profit growth for the Sensex set of companies at 19% year-on-year but just 2% quarter-on-quarter. For the Nifty 50, the brokerage estimates profits will grow at 23% y-o-y and remain flat on a sequential basis.
Auto manufacturers are expected to post a strong revenue growth on the back of a high single-digit increase in the average selling price (ASP). Most companies have been able to take price hikes and their product portfolios have been richer. Moreover, volumes have grown reasonably well.
Lower provisions are expected to boost banks’ bottom-lines even as operating profits might show subdued growth. Initial indications are that both loan and deposit growth have held up well. As in the previous quarter, the net interest margin (NIM) could see some moderation and contract by 10-15 basis points. Asset quality will stay strong thanks to lower slippages in asset quality.
With rural demand still muted, most consumer staples companies are expected to report low single-digit volume growth and low-to mid-single-digit value growth. This is because some players have taken price cuts. Moreover, the base effect of price hikes taken in the past is fading. An emerging trend in select segments in the space is the competition from local brands which is hurting the share of bigger players. The adhik maas and shravan seasons are understood to have partly hit the business of quick-service restaurant chains.
The September quarter has reported an improvement in pre-sales across the real estate sector and the traction in both sales and launches has been strong.
Metals producers are likely to report a high single-digit fall in volumes y-o-y in the September quarter. Realisations for steelmakers are forecast to come off sequentially.
Although it’s a typically seasonally strong quarter for IT players, revenues in constant currency terms would be modest sequentially. As is known, clients are cutting back spends on discretionary programmes and prolonging the time lines for existing projects. This is slowing down revenues. The sectors that have been worst hit are BFSI, retail and telecom.
For a sample of 3,010 companies (including banks and OMCs), net profits were up 44% y-o-y in Q1FY24. Excluding banks, financials and OMCs, profits went up by just 7.5% y-o-y).
KIE estimates the EPS (earnings per share) of the BSE 30 companies to come in at Rs 3,078 for FY24 and Rs 3,544 for FY25. For the Nifty50, the EPS is estimated at Rs 952 for FY24 and Rs 1,076 for FY25.