BFSI, auto sector drive earnings growth in Q4: Report

Q4 earnings scorecard: earnings for India Inc. in fourth quarter has been a mix of ups and downs, with certain sectors outperforming while ors grapple with challenges. Overall, 4QFY24 results have been a testament to resilience of domestic cyclicals, particularly in Banking, Financial Services, and Insurance (BFSI) and automobile sectors, brokerage firm Motilal Oswal said in a report.

BFSI saw 22 per cent year-on-year (YoY) growth, while auto sector reported a robust 38 per cent annual growth, driven by stalwarts like Maruti Suzuki and Bajaj Auto, Mumbai-based brokerage noted.

However, buoyancy in certain sectors was offset by struggles of ors. Oil & Gas sector, in particular, witnessed downturn, with 20 per cent decline in earnings, primarily attributed to Indian Oil’s profit plunging by 52 per cent. Excluding Metals and Oil & Gas, stocks under Motilal Oswal’s coverage and Nifty recorded 15 per cent annual earnings growth, surpassing expectations.

Cement sector emerged as a standout performer, reporting 33 per cent annual growth, surpassing estimates. Conversely, excluding BFSI, profits for stocks under Motilal Oswal’s coverage would have declined by 3 per cent annually. Moreover, Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) margin also known as operating profit margin of stocks under brokerage’s coverage, excluding financials, saw a marginal decline of 10 basis points annually to 17.1 per cent.

earnings growth story was mirrored in Nifty companies as well, with 13 per cent annual jump in earnings, surpassing expectations. HDFC Bank, Coal India, ICICI Bank, Maruti Suzuki, and TCS were among top contributors to this growth, collectively responsible for 75 per cent of incremental accretion in earnings. However, Tech Mahindra, Reliance Industries, and Wipro weighed down Nifty earnings.

Despite mixed sectoral performance, Nifty Earnings Per Share (EPS) remained stable, with estimates for FY25 and FY26 holding stey at Rs 1,133 and Rs 1,315, respectively, Motilal Oswal said.

Here are key highlights of sectoral performance:

Banks: Private banks reported healthy earnings growth, with notable performances from Axis Bank, Kotak Mahindra Bank, and RBL Bank. However, a mixed margin performance was observed among banks, with certain players grappling with net interest margin (NIM) compression despite moderate funding costs.

Lending NBFCs: vehicle segment, especially commercial vehicles, witnessed subdued demand due to ongoing elections, impacting performance of non-banking finance companies (NBFCs).

Automobiles: Despite margin pressures, sector saw in-line results, buoyed by healthy volume growth, a better product mix, and lower commodity costs.

Technology: Tier-1 companies struggled with lower-than-expected growth and weak demand, with near-term outlook remaining bleak.

Consumer: Consumption improved, albeit staple demand trends remained similar to previous quarter. Price justments are expected in coming quarters for commodity-sensitive categories.

Oil & Gas: Mixed results were observed, with Reliance Industries outperforming expectations while Indian Oil fell short due to weaker-than-expected refining margins.

aggregate performance of stocks under Motilal Oswal’s coverage showcased a 6 per cent annual growth in sales and an 11 per cent growth in EBITDA. Excluding Metals and O&G, companies recorded a robust 10 per cent YoY growth in sales and an impressive 17 per cent YoY growth in EBITDA in 4QFY24.

As earnings season unfolds, certain companies have exceeded profit estimates, including Reliance Industries, HDFC Bank, Coal India, and Axis Bank, while ors such as HCL Technologies and Titan have fallen short. Noteworthy upgres for FY25E include Coal India, Axis Bank, and Maruti Suzuki, while Bajaj Finance and HCL Tech face downgres, Motilal Oswal said.