The Nuvama-wide universe exceeded forecasts with 34% YoY profit growth driven by robust segment growth. While cement and industrial profits remained strong and exceeded forecasts, power profits declined. With the exception of cars, demand was modest even as margins increased. This is still an important factor to watch, the brokerage said.
A soft quarter was reported by Chemicals while IT was mixed. However, exports and pharmaceuticals saw rapid growth. Bank profits fell as NIMs were squeezed. Opex also held steady, but profits were maintained by significantly below-trend credit. Profits increased across the board, with Oil Marketing Companies (OMCs) seeing the biggest gains. Profits for metal companies rose sequentially but fell short of estimates.
![Q2FY24 revenue snapshot by sector Q2FY24 revenue snapshot by sector](https://www.livemint.com/lm-img/img/2023/11/17/original/Nuvama_1700206123518.png)
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Q2 Results: Nifty earnings were relatively flat in FY24E earnings per share (EPS), with declines in IT and commodities countered by gains in cement, autos and pharmaceuticals. The brokerage believes that the consensus estimate of 8-10% EPS growth for H2FY24 is feasible, compared to the 25% growth forecast for H1FY24.
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“However, it is FY25E earnings that we think are at risk due to the fading margin tailwinds. High valuations amid a slowing top line and fading margin tailwinds keep us cautious. We remain defensively positioned,” the brokerage said.
Also read: Q2 Results: Topline shrinks as capex holds; Check out 5 key takeaways from the company’s September quarter earnings
With respect to fast moving consumer goods (FMCG), information technology, domestic automobiles, telecom, internet, and pharmaceuticals, the brokerage has an “Overweight” (OW) stance and an “Underweight” (UW) call regarding banking, financial services, and insurance. (BFSI), industrials, commodities, and durables.
Here are five key trends highlighted by the brokerage of the general corporate income in the second quarter of FY24 (Q2FY24).
Domestic consumption
With the exception of automobiles and consumer services, where pick-up was initially delayed, demand was generally weak in the domestic consumer space. But as input prices begin to decline, the profits begin to emerge, leading to an increase in EBITDA. As a result, input prices begin to stabilize, and demand will become even more crucial in determining the marginal outlook.
Also read: Mid caps, caps too hot; investors should have a big tilt now, says Daulat Finvest’s Varun Fatehpuria.
Domestic investment
While the top line and the momentum of the order book of industrial companies continued to be strong, the EBITDA / t of the cement companies was stable on quarter-over-quarter (YoY). In the future, the profitability of industrials may decline as corporate capex slows, while that of cement companies should increase.
“Industrial companies posted another strong quarter. The highlight this time was the healthy execution and strong order book. However, the challenge lies in the outlook. Currently, capex is mainly driven by the public sector and orders from the Middle East. Going forward. , momentum in these (especially public capitals) could slow down,” explained the brokerage.
Also read: Grasim Industries share price rises 2%; is the stock worth buying after Q2 result?
External sectors
IT companies have seen a decline in top lines but stabilization of margins. Chemicals had a deep peak line contraction and were equally weak. Pharma and export car manufacturers reported impressive financial results.
goods
OMCs recovered well, and the profits of energy companies remained stable. Leverage increased along with the profits of metal companies. The earnings of metal companies are likely to continue to face pressure in the future.
Finances
Net interest margins (NIM) for banks declined, but opex remained high. However, BFSI earnings were boosted by consistent credit growth and below-trend credit costs.
Also Read: Can Nifty 50 cross 21,000 with pre-election rally ahead of General Election 2024?
Disclaimer: The above views and recommendations are those of individual analysts, experts and trading companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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Updated: 17 Nov 2023, 13:43 IST
(tagsTo Translate)Q2 Results