25 companies from the Nifty 50 index have announced their results as of May 8, 2022. As per a report by domestic brokerage Motilal Oswal (MOSL), profits for those 25 Nifty companies that have announced results so far grew 26 percent YoY as against MOSL's estimate of 22 percent year-on-year (YoY).
The report noted that excluding the banking, financial services and insurance sector (BFSI), the profits for these Nifty companies would have risen only 19 percent YoY versus the brokerage's forecast of 15 percent YoY.
"Nifty FY22E/FY23E EPS saw an upgrade of 0.7 percent/0.4 percent. Nifty EPS estimate for FY22 has been raised 0.7 percent to ₹737 largely due to BFSI and Autos. FY23E EPS too saw a marginal upgrade to ₹873 from ₹870 earlier as upgrades in BFSI and Tata Steel have been offset by downgrades in Technology and Reliance Industries," noted the brokerage.
The March quarter earnings so far depict a wide divergence between sectors adversely affected by rising raw material prices like Consumer Staples and Durables, Cement, Auto, and Metals and those not directly impacted by rising prices like Private Banks, NBFCs, and Technology, stated MOSL.
As per the brokerage, private Banks’ asset quality continues to improve with moderation in credit costs and NPA ratios, while the restructured book also dropped sequentially. The improvement was also led by moderation in slippages and supported by healthy recovery and upgrades, it added.
Meanwhile, the IT companies’ results were a mixed bag, with MOSL'd coverage universe reporting (along with estimates for companies yet to report) overall revenue growth of 2.3 percent QoQ. Tier II companies reported a better growth at 3.8 percent QoQ when compared with the 2.1 percent QoQ growth for Tier I companies, said the brokerage.
Further sales growth of Consumer companies was largely driven by price hikes, as volumes for staple companies continued to remain weak and reduced demand led to lower volumes amid a highly inflationary environment, while grammage cuts were taken to pass on the material cost increases, added Motilal.
Going ahead, MOSL noted that the changing macro backdrop with heightened worries on rising rate and liquidity tightening is impacting the global markets. Meanwhile, the earnings season continues to remain healthy, notwithstanding the challenges on multiple fronts, it added.
"BFSI has reported strong results as the asset quality continues to improve with moderation in credit costs and NPA ratios. In Technology, most of the companies delivered good deal wins and highlighted a strong pipeline," informed the brokerage.
Its model portfolio positioning continues to focus on earnings visibility, economic recovery, pricing power, balance sheet strength and reasonable valuations. It maintains an overweight stance on BFSI, IT, Consumer, Metals and Cement and retains an underweight position on Auto and Energy.