Thursday, May 11, 2023

Strong banks and improved auto outcomes Q4 blue-chip earnings

Strong bank, auto results boost Q4 blue­chip profits

 MUMBAI: The first set of numbers for the January-March quarter (Q4FY23) show that frontline companies have performed slightly better than expected, with companies in the banking & financial services (BFSI) outperforming those in other industries. This comes halfway through the results season.

According to a report published by Motilal Oswal Financial Services (MOFSL), the 26 Nifty companies that announced their results in Q4FY23 collectively reported a 10% increase in net profit, as opposed to an estimated 7% increase. It stated that combined profit would decrease by 1% in the absence of BFSIs and by an estimated 4%. Car and oil and gas organizations have likewise beated others among the main organizations while innovation and purchaser products organizations lived up to experts' assumptions.

The 26 of the 50 Nifty constituents that reported results had a combined net profit of approximately Rs 1,02,200 crore, representing an increase of nearly 10% annually. According to the MOFSL report, the corresponding figures for 20 of the 30 constituents of the sensex were approximately Rs 9,75,00 crore, representing a yearly rise of 9%.

Five organizations among the Clever constituents (Dependence Businesses, Hub Bank, ICICI Bank, HDFC Bank and TCS) have contributed 121% of the gradual YoY growth in profit, the by Gautam Duggad and Deven Mistry noted. Tech Mahindra (-2%) and Tata Steel (-90%) have had a negative impact on Nifty earnings. Further, Clever benefits would have expanded 22% YoY (versus assessed 21% ascent), barring metals and oil and gas. " Just six organizations in Clever have detailed benefits beneath our assumption, while eight have recorded a beat and 12 have been in line."

According to the report, the downgrades in technology are offset by upgrades in BFSI and automobiles, so the earnings per share (EPS) of the Nifty index for FY23 and estimates for FY24 remained largely unchanged at Rs 816 and Rs 976 (instead of Rs 812 and Rs 978 earlier).

Reliance Industries, Axis Bank, Kotak Mahindra Bank, HDFC, Bajaj Auto, Hero Motocorp, Nestle, and SBI Life Insurance were among the Nifty constituents whose net profit estimates were exceeded by analysts, according to the data. Then again, Goodbye Steel, Maruti Suzuki, Infosys, Goodbye Shopper and HDFC Extra security have missed their benefit gauges.

Duggad and Mistry accept that the Q4FY23 corporate profit so far have been in line yet disproportionate, with exhibitions of heavyweights like RIL, Pivot Bank, ICICI Bank, HDFC Bank and TCS driving the total numbers. " With 77% of our universe either meeting or exceeding profit expectations, the spread of earnings has been decent. Notwithstanding, development has been driven simply by BFSI, auto and innovation."

Nifty now trades at about 18x one-year forward price-to-earnings (PE) multiple, which is a significant decrease from the 21x level seen at the beginning of FY23. This comes after a flat FY23. We continue to be overweight in financials, capital expenditures, automobiles, and consumption (stocks). In our model portfolio, we have an underweight stance on metals, energy, and utilities, while we are neutral on IT and healthcare.

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