The earnings for the March 2023 quarter (Q4FY23) so far have been in line but lopsided, with performances of heavyweights, such as Reliance Industries, Axis Bank, ICICI Bank, HDFC Bank, and TCS, driving the aggregate, said a report by brokerage house Motilal Oswal. The spread of earnings has been decent with 77 percent of MOSL Universe either meeting or exceeding profit expectations, but the growth has been led only by BFSI, Auto and Technology, added the brokerage.
As of May 4, 2023, the brokerage reported that 26 Nifty stocks have posted a 10 percent YoY growth in net profit, a 15 percent YoY rise in EBITDA and an 11 percent jump in sales. Of these, 8 exceeded and 6 missed MOSL's profit estimates. Meanwhile, on the EBITDA front, 8 exceeded and 3 missed estimates during the quarter, added MOSL.
On the other hand, 78 companies within MOSL Universe have posted their earnings till May 4. The Q4FY23 aggregate earnings of the aforesaid 78 MOSL Universe companies have been in line with its estimates and risen 8 percent YoY, it informed. However, the EBITDA margin of the MOFSL Universe (excluding Financials) has contracted 50 bps YoY to 18.4 percent during the quarter.
Upgrades and Downgrades
As per the brokerage, until now, 24 firms within MOSL coverage have reported an upgrade of over 3 percent while 20 have reported downgrades of over 3 percent, leading to a better upgrade-to-downgrade ratio for FY24E.
Within the MOFSL Universe, Automobiles, and Metals have recorded an FY24E earnings upgrade of 3 percent and 2 percent, respectively. Conversely, Real Estate, Technology, and Telecom have witnessed an earnings downgrade, informed the brokerage.
Top FY24E upgrades: Bajaj Auto (6.9%), Nestle (3.2%), Kotak Mahindra Bank (2.4%), Axis Bank (2.3%), and Titan Company (2%).
Top FY24E downgrades: Wipro (-7.2%), Tech Mahindra (-5.3%), HCL Tech (-4%), Tata Consumer (-3.7%), and Infosys (-3.5%)
The brokerage further stated that the FY23 and FY24 EPS estimates remain largely unchanged at ₹816 and ₹976 (v/s ₹812 and ₹978 earlier), respectively, as downgrades in Technology are offset by upgrades in BFSI and Automobiles.
MOSL also lists some other interesting facts from the March quarter earnings till now:
- Profits of the 26 Nifty50 firms have risen 10 percent YoY in an aggregate in Q4FY23 but excluding Financials, profits would have declined 1 percent YoY.
- Further, Nifty profits would have increased 22 percent YoY excluding Metals and O&G.
- 5 companies within Nifty Universe – Reliance Industries, Axis Bank, ICICI Bank, HDFC Bank, and TCS – have contributed 121 percent of the incremental YoY accretion in earnings.
- Meanwhile, Tata Steel (-90 percent) and Tech Mahindra (-2 percent) have contributed adversely to Nifty earnings.
- Only six companies in Nifty have reported profits below MOSL expectations, while eight have recorded a beat and 12 have been in line.
- Among the Nifty constituents, Reliance Industries, Axis Bank, Kotak Mahindra Bank, HDFC, Bajaj Auto, Hero Motocorp, Nestle, and SBI Life Insurance have exceeded MOSL's profit estimates. Conversely, Tata Steel, Maruti Suzuki, Infosys, Tata Consumer, and HDFC Life Insurance have missed its profit estimates.
- These 26 companies constitute 55 percent of Nifty Universe and 41 percent of India's market capitalization.
"After a flat FY23, Nifty now trades at ~18x one-year forward P/E, which is a decent drop from the level of 21x seen at the beginning of FY23. We maintain our overweight stance on Financials, Capex, Autos and Consumption. We are neutral on IT and Healthcare while we have an underweight stance on Metals, Energy and Utilities in our model portfolio," said the brokerage.