Brokerages expect India Inc to report a rebound in earnings for the March 2022-23 quarter, after a relatively subdued performance in the previous two quarters. This growth is expected to be led by banking, financial services and insurance (BFSI) companies, consumer goods companies and auto manufacturers.
Combined net profit of Nifty50 companies (excluding Adani Enterprises) is expected to have grown by 15.6% to Rs 1.77 trillion in Q4 FY23, up from Rs 1.53 trillion in a year ago. Combined net profit for companies in the index increased 9.3% YoY in Q3FY23 and 1.4% YoY in Q2FY23.
These Nifty50 companies can report 12.5% year-on-year growth in net sales (net interest income for lenders) in Q4 FY23 to Rs 13.69 trillion in Q4 FY23. fiscal 23, up from Rs 12.17 trillion a year ago.
Earnings estimates suggest brokerages are betting on margin expansion for manufacturers in the fourth quarter of fiscal 23, amid falling commodity and energy prices, to more than offset the slowdown in revenue growth. The Street expects bank and non-bank lenders to continue to deliver strong top-line and net income growth in the fourth quarter, just as they did in the first nine months of fiscal 23.
The combined net profit of 11 BFSI firms that are part of Nifty50 is expected to have grown by 32.3% to Rs 56,824 crore in the fourth quarter of FY23, from Rs 42,939 crore a year ago; its net interest income, brokerage firms expect, will have grown by 29.4% yoy to Rs 1.82 trillion in Q4 FY23, from Rs 1.4 trillion in Q4 of fiscal year 22.
In total, BFSI companies are likely to account for 58% of incremental corporate earnings growth in the fourth quarter of FY23.
Excluding the BFSI companies, the combined net profit of the rest of the companies in the index could have grown by 9.1% to around Rs 1.2 trillion in the January-March 2023 period from Rs 1.1 trillion ago. a year, according to the brokerage firms.
By contrast, non-BFSI companies’ combined net profit had declined year-over-year in Q2FY23 and Q3FY23. FMCG companies and automakers are likely to be the top drivers of earnings in the non-BFSI space, followed by IT services exporters such as Tata Consultancy Services, Infosys and HCL Technologies.
The analysis is based on FY23 fourth-quarter earnings estimates from various brokerages, including Motilal Oswal Financial Services (MOFSL), Kotak Institutional Equity, Elara Securities and Bloomberg Consensus Estimates.
The estimates are for 49 of the Nifty50 companies, excluding Adani Enterprises, which is not widely tracked by brokerage firms.
These brokerages, however, do not see broad-based, secular growth in corporate profits. “The earnings performance for both MOFSL Universe and Nifty in the fourth quarter of FY23 is likely to be unbalanced and led by some heavyweights. Five companies within the MOFSL Universe (SBI, IOC, BPCL, IndiGo and Tata Motors) are expected to contribute 72 percent of the incremental year-on-year build-up of earnings. Similarly, within Nifty, five companies (SBI, ICICI Bank, ONGC, Tata Motors and BPCL) are likely to contribute 82 percent of incremental year-on-year earnings build-up,” Motilal Oswal Financial Services analysts write in your earnings preview for Q4FY23.
The brokerage expects its universal earnings to rise 15 percent year-over-year. For Nifty earnings, the expectation is 14% year-over-year growth in the fourth quarter of fiscal 23.
Kotak Institutional Equity analysts are relatively conservative in their earnings estimates. “We expect KIE universe net income to increase 6.5% yoy and 17% qoq in the fourth quarter of fiscal 2023. We expect net income of (1) cars (improvement in PV and CV volumes, margin
improvement for OEMs) and (2) banks (strong loan growth, stable NIMs, and steady asset quality) to rise sharply year-over-year, but metals and mining net proceeds (lower prices of raw materials, weak realizations) decrease considerably year on year”. write Sanjeev Prasad, Sunita Baldawa and Anindya Bhowmik of Kotak Institutional Equity (KIE) in their earnings preview.
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