Brokerages expect Nifty50 companies to have cumulatively witnessed strong double-digit growth in their earnings in the first quarter of FY24 (Q1FY24).
This growth in the combined earnings is expected to have been driven by banks, automakers, and oil & gas companies.
Other sectors may report muted profit growth.
According to brokerage estimates, Nifty50 companies — excluding Adani Enterprises (for which earnings estimates are not available) — are expected to report a combined net profit of Rs 1.71 trillion for Q1FY24, up 22.4 per cent year-on-year (YoY) from Rs 1.4 trillion.
The index companies’ expected net profit could be 2.2 per cent higher than the Rs 1.68 trillion reported in Q4FY23.
YoY growth in corporate earnings in the June quarter, as suggested by brokerage estimates, would largely be driven by margin expansions, rather than higher volume and revenue growth.
In fact, analysts expect a sequential slowdown in corporate revenue growth in the first quarter of FY24.
A continued slowdown in top-line growth raises concerns about the sustainability of the current pace of growth in corporate earnings.
There could be only 6.7 per cent YoY growth in Q1FY24 in the combined net sales (net interest income in the case of banks and non-banking lenders) of 49 Nifty50 companies in the Business Standard sample, down sharply from 15.2 per cent YoY growth in Q4FY23.
This could be the least in the past 10 quarters.
The companies in the sample are expected to report combined net sales of Rs 13.26 trillion in Q1FY24, up from Rs 12.83 trillion a year ago.
While companies across sectors are likely to report a slowdown in revenue growth for the June quarter, it may be the worst for metals & mining and oil & gas companies.
Most companies in these two sectors are expected to report a YoY decline in their net sales in Q1FY24 due to a combined effect of lower product prices and muted volume growth.
In line with the trend in the past few quarters, banks and other non-bank lenders are expected to have driven earnings growth in the April-June period.
Automakers and public sector oil marketing companies are also expected to report strong growth in earnings in the first quarter.
“Overall earnings growth is likely to be driven once again by domestic cyclicals, such as BFSI (banking, financial services and insurance) and auto (companies), which are expected to post 47 per cent and 11x YoY jump, while consumer and IT (firms) are likely to report a healthy 19 per cent and 16 per cent YoY growth, respectively,” write analysts at Motilal Oswal Securities in their earnings preview for Q1FY24.
In contrast, metal & mining companies, crude oil producers, pharmaceutical firms, agrochemical makers, and a few insurers are expected to be laggards and may report YoY contraction in their earnings in Q1FY24.
The combined net profit of 11 BFSI companies in Nifty50 is expected to have grown by 46.8 per cent to Rs 52,616 crore in Q1FY24, from Rs 35,851 crore a year ago.
Similarly, their net interest income is expected to have risen 31.7 per cent YoY to Rs 1.67 trillion.
In comparison, the combined net profit of 38 non-BFSI companies is expected to have grown 14 per cent to around 1.19 trillion in Q1FY24, from Rs 1.04 trillion a year ago.
These non-BFSI companies’ combined net sales are expected to have grown only 3.8 per cent YoY to Rs 11.58 trillion.
Among individual index companies, Bharat Petroleum Corporation (BPCL), State Bank of India (SBI), Tata Motors, ICICI Bank, and HDFC Bank are expected to be the five biggest contributors to the overall growth in corporate earnings in Q1FY24.
These companies are expected to have added nearly Rs 35,000 crore to their combined net profit in Q1FY24 on a YoY basis, against Rs 31,300-crore incremental growth in Nifty50 companies’ overall earnings during the quarter.
At the other end of the spectrum, Tata Steel, Oil & Natural Gas Corporation (ONGC), Hindalco, Coal India, and Reliance Industries are expected to lead the laggards in Q1FY24.