Expenses increase to limit earnings growth in Q2

NEW DELHI : Business results for the September quarter of India Inc. will likely be fueled by a domestic economic recovery, while global volatility dampens performance in export-oriented sectors.

Mint calculations based on Bloomberg consensus earnings estimates show that 41 out of 50 Nifty companies (financial not included) could see an average revenue growth of 18.6% year over year. last. However, cost pressures, although they may be peaking, could drag down operating performance and earnings growth. Consensus profit before interest, tax, depreciation and amortization in Q9 (Q2) may decrease by 9.3% YoY and 14.5% respectively.

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“Q2 will mark five consecutive quarters of decline in operating margins on a yoy basis for our coverage, excluding oil finance and marketing firms. However, margins are likely to expand continuously, showing signs of bottoming out in Ebitda margins,” said analysts at Yes Securities Ltd. Ebitda stands for pre-earnings. interest, taxes, depreciation and amortization.

Although crude oil and commodities have fallen from their peak in June, inventories of high-cost raw materials could continue to hurt companies before easing in the third quarter.

Analysts at Elara Securities (India) Pvt. “Due to continued margin pressure, ex-financial firm Ebitda and Nifty’s overall net profit are expected to be flat year-on-year,” Ltd said.

Revenue growth in Q2 was likely led by the domestic and consumer-driven sectors, led by finance and supported by consumer discretionary. Rapidly growing demand and stockpiling ahead of the holiday season can help cars and consumer vehicles last.

Analysts at Motilal Oswal Financial Services Ltd (MOFSL) said sectors focused on domestic consumption and investment could outperform sectors dependent on global demand/cycle/commodity .

Sectors such as metals, oil and gas that led growth in previous quarters are expected to lag behind. The downturn in base metals and steel demand and prices, as well as export taxes on steel, are likely to hit metal companies, while higher coal costs continue to limit earnings. In addition, tax losses, falling refining margins, inventory losses and higher natural gas prices are key constraints facing oil and gas producers, marketers and distributors.

“We expect net income from autos (on the back of improved chip availability), banking (strong loan growth, expanding net margins, and plummeting loan provisions) and financials. Diversity (loan growth) will increase sharply in a year. – on a one-year basis,” said analysts at Kotak Institutions Equities. They expect net income from building materials due to high costs of fuel and electricity, metals and mining due to low commodity prices. worse, weak realities and oil, gas and fuel consumables (weak refining margins and large inventories and marketing losses in the case of downstream oil companies), plummeting both in terms of sequentially as well as YoY Single digit year-over-year growth is expected for consumer staples as they record modest output growth. modest constant monetary revenue growth and profit margin constraints will be the main influencing factors.

“Nifty 50 earnings growth is expected to be muted in the low single digits in Q2, mainly due to profit compression in cyclical sectors,” said Sushant Bhansali, chief executive officer of Ambit. period and also due to the high fundamental effect in the second quarter of last year,” said Sushant Bhansali, CEO of Ambit. Asset Management.

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