MUMBAI: Headline profit growth is expected to be muted in the March quarter earnings season as good performances from automobile manufacturers, banks, and pharmaceuticals will be offset by modest numbers from the metals & mining pack. A weak discretionary spends environment, together with the spillover of furloughs from the December quarter, will mean unexciting revenues from IT majors. Again, consumer demand remains by and large subdued except for premium products.
Auto makers have reported robust growth in volumes and have also managed to earn better prices. Banks will have gained from lower provisioning as asset quality remains good. Tata Consultancy Services (TCS) will kick off the results season on April 12.
Net profits for the Nifty 50 set of companies are estimated to rise by 4% year-on-year and 7% quarter-on-quarter, according to Kotak Institutional Equities (KIE). For the BSE 30, net profits in Q4FY24, are expected to go up by 5% y-o-y and 8% q-o-q.
Revenues for most auto producers are tipped to rise by a strong 14-15% y-o-y. This would be driven by strong volumes growth in the two-wheeler segment of about 25% y-o-y and in the passenger vehicle space in high single digits. The quarter also saw an increase in average selling prices (ASPs) of mid-single digits as companies sold more high-value models.
With loan growth slowing during the March quarter, banks are expected to see earnings growth lose some pace. Net interest margins are estimated to contract by about 10-15 basis points sequentially with the cost of funds having gone up.
As they continue to negotiate tepid discretionary spends, most top-tier software services companies are expected to report either a sequential fall in revenues; for some like TCS, top line growth could be flat. At the same time most companies are expected to guide for a good FY25.
The poor run of makers of consumer staples continues with volume growth tipped to come in at low-to-mid single digits for most companies. While rural demand has recovered, revenue growth is nonetheless expected to be muted. At the same time, profitability could be good as companies rein in costs.
Most top-rung pharma companies are expected to report a good quarter on the back of stable prices of generics in the US geography. Moreover, business has been brisk in other markets too and should help offset the seasonal weakness in the home market.
Given that volumes were flat and that prices have been capped, upstream oil & gas are estimated to report a sequential rise in operating profits of 3-5%, resulting from lower operating expenses. For OMCs (oil marketing companies), the Rs 2 per litre cut in auto fuel prices in mid-March notwithstanding, the blended marketing margins should expand sequentially mainly due to better marketing margins on diesel. Better margins on some products like gasoline and also adventitious gains could result in better gross refining margins for a couple of OMCs.
Ahead of the Q4 earnings, KIE estimates the EPS (earnings per share) for the Nifty at Rs 989 for FY24 and at Rs 1,088 for FY25. At the current level of 22,673, the Nifty trades at nearly 23 times FY24 earnings and close to 21 times estimated FY25 earnings.
Source: The Financial Express