With the fiscal fourth quarter earnings season all set to kickstart this week, Nuvama Institutional Equities said that earnings weakness persisting during 9MFY25 is likely to streak through Q4FY25 as well. Summarising the key highlights, the brokerage elaborated, “i) Top-line growth for coverage (ex-OMCs) is likely to be subdued (~6 per cent YoY) for a straight 8th quarter. ii) Weak top line is now weighing on margins, dragging profit growth to just 1 per cent (9MFY25: 6 per cent). iii) Profits to be weak in cement, FMCG, energy and autos; metals, chemicals, pharma and telecom to post strong growth.
This week, IT services major Tata Consultancy Services (TCS) will release its Q4 earnings report on 10th April. The coming week will see others like Wipro announcing Q4 results on 16th April and Infosys on 17th April and banking majors ICICI Bank and HDFC Bank on 19th April.
Nuvama said, “Overall, profit recovery remains elusive, disappointing consensus. Nifty 50 EPS is likely to edge up 2 per cent (6 per cent in FY25 based on preview)— implying cuts to FY25 EPS itself. A weak FY25 exit amid rising global uncertainties poses risks to 13 per cent FY26E Nifty EPS growth expectation. This along with elevated valuations warrants a defensive bias.”
Top-line growth to remain subdued
According to Nuvama, Q4 top-line growth is forecasted at 6 per cent YoY for its coverage universe (excluding OMCs), versus 8 per cent in Q3FY25. “This is likely to be the 8th straight quarter of sub10 per cent top-line growth. While the top line has been subdued in both FY24 and FY25, the mix is different. In FY24, exports and low-end consumption weakened, whereas in FY25, BFSI, discretionary consumption and capex slowed,” the brokerage firm said. In terms of sectors, it added, top line is likely to be a) good (> 15 per cent YoY) in EMS, internet, NBFCs, QSR, consumer services; ii) moderate (10–15 per cent YoY) in durables, FMCG, pharma, retail, industrials, non-lending financials; and iii) weak (< 10 per cent YoY) in IT, banks, metals, energy, paints, cement.
EBITDA margins for the coverage (ex-commodities and BFSI) are likely to be stable YoY (versus large expansion in FY24). However, per the analysis report, PAT margin is now weakening as depreciation (owing to previous years’ capex) and credit costs start to inch up. As a result, PAT growth is likely to be 1 per cent versus 4 per cent YoY in Q3FY25 and 7 per cent YoY in H1FY25, a significant moderation from 20 per cent-plus in FY24. On a YoY basis, profits are likely to be weak for energy, cement, BFSI and FMCG, and now even industrials poised for a deceleration. Chemicals, QSR and telecom shall post strong growth., it added.
Nifty 50 earnings: Downgrades likely
Overall, Nuvama said, “We anticipate Nifty 50 earnings shall grow 2 per cent YoY in Q4FY25. Based on our earnings preview, FY25 Nifty EPS is likely to grow 6 per cent—much lower than 8 per cent forecasted a quarter back.” Furthermore, it added, global uncertainties have increased substantially following the imposition of Trump tariffs. Even as the direct impact of US tariffs is limited, the indirect impact is likely to be sweeping given ~2/3 of Nifty top line is directly or indirectly linked to global trade. “A weak top line along with peak margins poses risks to mid-teens earnings growth for FY26E/27E. Consensus EPS forecast of Nifty 50 for FY25/26/27 is Rs 1,011/1,154/1319,” said Nuvama.
Here is an analysis on sectoral performance for Q4 for few of the key segments:
Cement sector: Nuvama said that the cement demand for its coverage is estimated to expand by approximately 10 per cent YoY (on the back of an increase in government spending) in Q4FY25 with Ambuja Cements likely to lead volume growth. “We reckon realisations in Q4FY25 shall improve 1.5–2 per cent QoQ, but they are still down YoY. EBITDA for our coverage is likely to decrease 1.5 per cent YoY. While prices increased in Jan/Feb-25, Mar-25 reported some rollback of price hikes. Nevertheless, to see pricing improve in Q4 when the industry is focusing on volume push is indeed positive,” Nuvama said.
Nuvama recommended ‘BUY’ on JK Cement, Ambuja Cements and ACC and ‘HOLD’ on Ultratech Cement, Shree Cements and Grasim Industries.
Consumer staples sector: The brokerage firm has forecasted revenue/EBITDA/volume growth of 9 per cent/ 3 per cent/ 4 per cent YoY in Q4FY25 (versus revenue/EBITDA/volume growth of 10 per cent/ 1 per cent/ 5 per cent YoY in Q3FY25 and 3 per cent/ 5 per cent/ 7 per cent YoY in Q4FY24). It said that the strong summer is expected to drive growth in cola, beverages, talcum powder, and ice creams. Liquor companies shall perform well, boosted by premiumisation, Andhra Pradesh policies, and the wedding season. Margins in soaps, snacks, tea and coconut oil are expected to be under pressure due to sharp inflation in raw material costs. “Our top picks are United Spirits, United Breweries, Pidilite, and Marico,” said Nuvama.
IT sector: Q4FY25 shall be a mixed quarter for the IT sector with large caps reporting QoQ revenue decline while mid caps continue to deliver strong organic growth (0 per cent to +4 per cent QoQ). “Margins shall largely be stable with a slight improvement for most companies, except for those with seasonality or wage hikes (Infosys, HCL Tech and LTTS). We forecast the tariff-led elevated level of uncertainty, shall reflect on the commentary and guidance by the companies. We do believe the recovery in discretionary spending might be delayed, but not by much. We are trimming estimates and target prices to reflect that, but the 15 per cent correction captures it,” Nuvama said. The brokerage firm stayed positive on select large-cap (TCS, Infosys) and mid-cap names (Coforge, Persistent and Mphasis).