Q2 Earnings Season Begins Tomorrow: Here’s What Investors Are Waiting For

The domestic stock market’s outperformance against its global peers would be tested as second-quarter results from big companies start rolling in from Monday with the start of earnings season. With the exception of the metals and oil and gas sectors, analysts expect India Inc’s earnings to remain strong.

Nifty earnings are expected to remain stable on a yearly basis, however. Companies focused on domestic consumption are likely to outperform those that depend on exports.


Here’s what brokerages expect from Q2 earnings season:





The brokerage expects earnings for companies in its coverage universe to decline 17%, while Nifty’s earnings remain flat year-over-year in 2Q. “Overall performance is impacted by a sharp drop in global commodities. Excluding Metals and O&G, we expect MOFSL and Nifty to each post solid earnings growth of 30%, fueled by BFSI and Autos. Outside of Metals & O&G , profits will be driven by Cement and Healthcare,” he said.

Motillal cut FY23 Nifty EPS estimate by 3% to Rs 817, due to lower metals and O&G earnings. “We now expect the Nifty EPS to rise 11% / 21% in fiscal year 23 / 24, respectively. Finances alone are likely to account for two-thirds of additional FY23E revenue in Nifty.


Kotak Institutional Stocks


Kotak expects net income from Automotive (improving chip availability), Banking (strong loan growth, NIM expansion and sharp decline in loan loss provisions) and Diversified Financials (accelerating loan growth) is increasing sharply on an annual basis.

Net income from building materials (high fuel and power costs), metals and mining (lower commodity prices, low realisation) and oil, gas and consumable fuels (low refining margins and significant inventory and marketing losses in the case of downstream oil companies) are expected to decline sharply both sequentially and on an annual basis.


Prabhudas Lilladher


“We estimate sales growth of 27.9% YoY, decline of 8.2% in EBIDTA and decline of 38.2% in PAT considering an impact of Rs. hedging universe of oil and gas due to high trading losses, lower spreads and a windfall tax,” Prabhudas said.

Automotive, aviation, travel, chemicals, capital goods and financial services will see strong EBIDTA growth, oil and gas will be a major drag, he said.


Securities


The combination of healthy demand and stabilized margins should keep non-commodity earnings healthy (20%+). Meanwhile, shrewd earnings are expected to remain flat (H1FY23: 6% YoY, if estimates are met). This is likely to trigger profit cuts, likely led by commodities and exporters. For other sectors, the current quarter should be reasonable, but it is the deterioration in momentum that worries us.


YES Titles


The second quarter will mark the fifth consecutive quarter of shrinking operating margins on an annual basis. However, margins are expected to increase sequentially, indicating signs of dips in EBITDA margins. The automotive sector is also expected to expand, reversing four consecutive quarters of erosion. On the negative side, cement, building materials, pharmaceuticals and IT are expected to experience lower margins of 7.7 ppts, 6.3 ppts, 3.0 ppts and 1.8 ppts on an annual basis respectively.

(Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

Robert D. Coleman