India Strategy: Key takeaways from Q1FY24

16 Aug 2023 , 10:32 AM

Q1FY24 saw an aggregate Sales/Ebitda/PAT growth of 2%/31%/59% on a YoY basis, for a sample of 345 companies out of BSE500. Financials and commodities (Oil & Gas) contributed majorly to PAT growth, as ex-financials and commodities, the BSE500 PAT growth was only 28% YoY/-5% QoQ. Banks continued to report a good set of numbers; Autos, Tyres, Paints, and other commodity consumers saw earnings growth and margin improvement on the back of lower input costs. Nifty saw an 8% QoQ PAT growth — and assuming no growth for the rest of the year, analysts of IIFL Capital Services get to 25% YoY PAT growth for FY24, same as what consensus is currently building in so there may be upside risks to earnings. Overall FY24 PAT upgrade for BSE500 was muted at just 1.4% during the result season. Of companies that have seen upgrades but poor stock performance, analysts of IIFL Capital Services like Indigo, HDFC Bank and Ultratech. TechM and Page have run-up, despite downgrades; they see them as sells. 

Sectoral overview: 

Overall, Q1FY24 was more or less an in-line quarter with earnings along the expected lines. IIFL Universe saw an in-line performance (~1% miss on Ebitda/PAT estimates). BFSI continued its strong show, while sectors like OMCs, Paints, Tyres, Automobiles, Travel and Auto Ancs have benefitted from the fall in crude and other commodity prices, as expected; have also reported good improvement in margins. Sectors like Metals and Chemicals have struggled. 

Earnings Change: 

Overall, BSE500 saw a muted 1.4% upgrade to FY24 PAT estimates during the results season, with Travel (31%, led by Indigo), OMCs (25%), Automobiles (9%) and Tyres (7%) seeing the highest upgrades. On the other hand, Chemicals (10%), Telecom (6%), Media (6%) and Metals (5%) saw the highest downgrades. Companies that have seen FY24 PAT upgrades, but weak stock performances during the results season are Indigo, BPCL, HDFC Bank, Ultratech Cement and Apollo Tyres. On the other hand, companies seeing downgrades, albeit good stock performances include MCX, Sobha, PVR Inox, ACC, Tata Steel and Tech Mahindra.