More cos have managed to beat profit estimates in Q2FY24: ICICI Securities

This has led to an upward revision in earnings growth estimates for FY24 as well as FY25

The September 2023 quarter (Q2FY24) earnings season is currently underway. An early analysis of the result trends by brokerage firm ICICI Securities shows more companies have managed to beat profit estimates. This has led to an upward revision in earnings growth estimates for this fiscal (FY24) as well as next (FY25).

There have been no “major negative surprises with cyclicals driving profit growth, while defensives lag. Overall, within our coverage universe, the upgrades for FY24E/FY25E earnings have been driven by cyclicals related to capex, discretionary consumption, and credit growth (Ultratech, ACC, JSW Steel, Voltamp, Polycab, Maruti, Bajaj Auto, Kewal Kiran, IndusInd Bank, PNB Housing). Earnings estimate downgrades are largely due to defensive sectors (IT, FMCG, grocery retail) along with cyclicals related to QSRs, retail, building materials, rural finance and RIL,” said ICICI Securities in a note.

It further said that the earnings growth for NSE200 universe so far has remained robust at 31 per cent (excluding HDFC Bank) which “dovetails with our expectations of a rising PAT/GDP upcycle”

While earnings growth has been robust, the topline growth has been modest. For the NSE200 universe (ex-HDFC Bank) and the Nifty 50 index sales have grown just 2 per cent year-on-year (YoY) and 4 per cent quarter-on-quarter. Companies in the Nifty Smallcap 100 are outliers posting 18 per cent sales growth and 58 per cent profit growth on a YoY basis. However, only 40 per cent companies in the index have declared their results.