Beats Vs Misses: Nifty's Q1 PAT Growth Lowest Since Pandemic; OMCs Drag, While Auto, BFSI Top Winners

The April to June 2024 quarter has been bittersweet for Nifty with single-digit EBITDA growth of 5%, the lowest in four years. Nifty's bottom line also faced its lowest growth since the Covid-pandemic quarter that ended on June 2020. Among the hits and misses, oil and gas companies dragged Nifty's Q1 earnings, while auto and BFSI segment growth kept the benchmark out of the red line. Following the latest performance, brokerage Motilal Oswal has trimmed Nifty's EPS forecast for FY25.

Data from Motilal Oswal highlighted that Nifty delivered a 4% YoY PAT growth (vs its estimate of +3%). Nifty reported the first quarter of a single-digit EBITDA growth (5%) in four years, (the last time Nifty posted single-digit EBITDA growth in Sep 20). Also, 4% PAT growth is the lowest since the Pandemic quarter (June 20).

Further, the data revealed that five Nifty 50 companies namely HDFC Bank, Tata Motors, ICICI Bank, Maruti Suzuki, and TCS - contributed 127% of the incremental YoY accretion in earnings. Conversely, BPCL, JSW Steel, ONGC, Reliance Industries, and Grasim Industries contributed adversely to the Nifty earnings.

In its latest research report, Motilal Oswal said, "The beat-miss ratio for the MOFSL Universe was unfavourable, with 43% of the companies missing our estimates, while 29% reported a beat at the PAT level. For the MOFSL Universe, the earnings upgrade-to-downgrade ratio has turned weaker for FY25E as 46 companies' earnings have been upgraded by >3%, while 107 companies' earnings have been downgraded by >3%."

Also, the brokerage said, "The earnings upgrade/downgrade ratio of 0.4x was the worst since 1QFY21. EBITDA margin of the MOFSL Universe (ex-Financials) contracted 120bp YoY to 16.3%."

Of the 24 sectors under Motilal's coverage, 7/11/6 sectors reported profits above/inline/below its estimates. Of the 263 companies under coverage, 77 exceeded Motilal's profit estimates, 113 posted a miss, and 73 were in line.

On sector-wise performance, Motilal's data mentioned that the aggregate performance was hit by a drag from OMCs. Excluding OMCs, the MOFSL Universe and Nifty posted 12% and 9% earnings growth versus expectations of +10% and +7%, respectively. The Nifty earning was driven once again by domestic cyclicals, such as Automobiles (+28% YoY) and BFSI (+16% YoY), with improved contributions from Healthcare (+29% YoY), Real Estate (+62% YoY), and Capital Goods (+23% YoY).

Moreover, metals also reported a strong earnings growth of 18% YoY (versus Motilal's estimates of a 1% YoY drop), driven by Vedanta, Hindalco, and Tata Steel. Excluding BFSI, profits for the MOFSL Universe would have declined 6% YoY (versus its estimate of -8% YoY).

For the full year FY25, Motilal expects companies under its coverage to deliver sales/EBITDA/ PAT growth of 9%/9%/11% YoY in FY25. The Financials and Metals sectors are projected to be the key growth drivers, with 16% and 38% YoY earnings growth, respectively. They are likely to contribute 78% of the earnings growth.

However, Motilal said, "The Nifty EPS estimate for FY25 was cut by 1.7% to INR1,115, largely owing to Reliance Industries, ONGC, and BPCL. FY26E EPS was also trimmed by 1% to INR1,316 (from INR1,330) as upgrades in Infosys, Coal India, Tata Motors, and Maruti were offset by downgrades in ONGC, Axis Bank, HDFC Bank, ICICI Bank, and IndusInd Bank."