BFSI, auto sector drive earnings growth in Q4: Report

Q4 earnings scorecard: The earnings for India Inc. in the fourth quarter has been a mix of ups and downs, with certain sectors outperforming while others grapple with challenges. Overall, the 4QFY24 results have been a testament to the resilience of domestic cyclicals, particularly in the 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, the Mumbai-based brokerage noted.

However, the buoyancy in certain sectors was offset by the struggles of others. The 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 the stocks under Motilal Oswal’s coverage would have declined by 3 per cent annually. Moreover, the Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA) margin also known as operating profit margin of stocks under the brokerage’s coverage, excluding financials, saw a marginal decline of 10 basis points annually to 17.1 per cent.

The earnings growth story was mirrored in the 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 the top contributors to this growth, collectively responsible for 75 per cent of the incremental accretion in earnings. However, Tech Mahindra, Reliance Industries, and Wipro weighed down Nifty earnings.

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

Here are key highlights of the 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: The vehicle segment, especially commercial vehicles, witnessed subdued demand due to ongoing elections, impacting the performance of non-banking finance companies (NBFCs).

Automobiles: Despite margin pressures, the 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 the near-term outlook remaining bleak.

Consumer: Consumption improved, albeit staple demand trends remained similar to the previous quarter. Price adjustments are expected in the 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.

The aggregate performance of the 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 the earnings season unfolds, certain companies have exceeded profit estimates, including Reliance Industries, HDFC Bank, Coal India, and Axis Bank, while others such as HCL Technologies and Titan have fallen short. Noteworthy upgrades for FY25E include Coal India, Axis Bank, and Maruti Suzuki, while Bajaj Finance and HCL Tech face downgrades, Motilal Oswal said.