Q1 results interim review: Most Nifty companies beat PAT estimates; banks deliver steady performance, says Motilal Oswal

The June quarter (Q1FY24) earnings of Nifty companies have been broadly better than expected so far with 12 companies surpassing the PAT estimates, said brokerage firm Motilal Oswal Financial Services (MOFSL).

Motilal Oswal pointed out that as of July 31, 33 Nifty companies and 120 companies within the MOFSL Universe haveannounced their Q1FY24 results. These companies constitute 68 per cent and 72 per cent of the estimated PAT for the MOFSL and Nifty Universe, respectively. Besides, these companies hold 46 per cent of India's market capitalization, and 77 per cent weightage in the Nifty index, the brokerage firm said.

"As of 31st July, 33 Nifty stocks have reported sales, EBITDA, PBT and PAT growth of 8 per cent, 29 per cent, 37 per cent and 43 per cent, year-on-year (YoY) respectively, versus the estimates of 5 per cent, 27 per cent, 33 per cent and 41 per cent, respectively," Motilal Oswal said.

"Of these, 12 companies surpassed our PAT estimates while 9 companies have missed our PAT estimates and 12 have been in line. On the EBITDA front, 9 companies have exceeded our estimates while 10 companies have missed our estimates during the quarter," the brokerage firm said.

The brokerage firm said among the Nifty constituents, Tata Motors, HDFC Bank, Kotak Mahindra Bank, Maruti Suzuki, JSW Steel, Asian Paints, Dr Reddy’s Labs, Cipla, Nestle, UPL, and SBI Life Insurance have exceeded its profit estimates. Conversely, BPCL, Infosys, HCL Technologies, HUL, LTIMindtree, Tech Mahindra, Tata Steel, and Tata Consumer have missed the profit estimates.

Motilal Oswal pointed out that the Nifty is trading at a 12-month forward P/E (price-to-earnings ratio) of 19.1 times, at a 5 per cent discount to its own long-period average (LPA).

Sectoral performance

Among the sectors, Motilal pointed out that IT services companies reported weak performance in Q1FY24 with flattish median revenue growth quarter-on-quarter (QoQ) in constant currency (CC), in an otherwise seasonally strong quarter.

"The weakness in key verticals continued through 1Q with BFSI and Retail reporting a median USD revenue decline of 1.2 per cent and 0.4 per cent QoQ, respectively," said the brokerage firm.

Earnings growth of the banking sector remained steady even as the margin trajectory turned across several banks (barring Union Bank which posted a 15bp QoQ expansion), Motilal pointed out, adding that the asset quality continued to improve while SMA (special mention accounts) and restructured pool remained in control.

In the NBFC sector, vehicle financiers demonstrated healthy disbursement momentum driven by strong underlying demand and sectoral tailwinds, despite Q1 historically being a seasonally weak quarter, Motilal said.

In the automobile sector, the initial set of results has been a mixed bag. "Volume offtake was muted in commercial vehicles (CVs, due to pre-buying in Q4FY23, and tractors, while domestic two-wheelers (2Ws) remained stable," said Motilal Oswal.

Aggregate sales in the consumer space stood in line with the estimates of the brokerage firm, but EBITDA and PAT exceeded expectations. The aggregate FMCG sector posted muted YoY volume growth.

"The oil & gas sector so far has reported mixed results. The underperformance of Reliance Industries has been led by weak transportation fuel cracks and lower downstream chemical margins," said Motilal Oswal.

"We remain overweight on financials, consumption, and automobiles. We are underweight on metals, energy and utilities and neutral on healthcare and telecom in our model portfolio," said the brokerage firm.

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