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Auto, BFSI dominated Q4 earnings circuit

June 25, 2024 13:11 IST

Operating margins put the pedal to the metal on corporate earnings, fuelled by sector-wide Ebitda margin gains, driving net profits to victory in five straight quarters.

Krishna Kant and Ram Prasad Sahu/Business Standard get a ringside view.

Stocks

Illustration: Uttam Ghosh/Rediff.com

Operating margins have been the primary driver of corporate earnings in India in recent quarters, despite revenue growth suffering from weak consumer demand.

Companies across sectors have reported a sharp improvement in earnings before interest, tax, depreciation, and amortisation (Ebitda) margins over the past two years, benefiting from lower commodity and energy prices.

 

Higher margins more than compensated for slower revenue growth, resulting in double-digit growth in net profit for five consecutive quarters.

Adjusted for exceptional gains and losses, the combined net profit of listed companies rose by 11.4 per cent year-on-year (Y-o-Y) in the fourth quarter (Q4) of 2023-24 (FY24), down from 17.3 per cent in Q4 of 2022-23 (FY23) and 24.1 per cent in the third quarter (Q3) of FY23.

Quarterly combined revenues increased by 8.4 per cent Y-o-Y, a decline from 13 per cent in Q4FY23 but an improvement from 7.3 per cent in Q3FY24.

Ebitda margin for the quarter increased to 26.3 per cent of revenues in Q4FY24, up from 24 per cent a year ago but slightly down from 26.4 per cent in Q3FY24.

This fourth-quarter Ebitda margin was nearly 230 basis points (bps) higher than the five-year average of 24 per cent. Consequently, the net profit
margin reached 8.9 per cent of revenues in Q4FY24, close to an all-time high and nearly 190 bps higher than the five-year average net profit margin of 7 per cent.

Sector-wise, corporate earnings in Q4 were driven by domestic cyclical sectors such as automotive, banking and finance, capital goods, cement, pharmaceutical, and healthcare.

In contrast, global cyclicals such as metals and mining and oil and gas companies underperformed, dragging down profitability.

The quarter also saw fast-moving consumer goods companies and information technology services exporters experiencing flat to low single-digit growth in revenues and profits.

According to analysts at Motilal Oswal Financial Services, corporate earnings exceeded expectations, largely due to stronger-than-anticipated performances from lenders and the automotive sector.

They noted that gains from margin expansion appear to have peaked in Q4FY24.

Here is the earnings scorecard of top companies across 10 major sectors in the listed space for Q4FY24.

Metals & Mining

Automotive

Capital Goods & Infra

FMCG

Consumer & Retail

IT/Software

Oil & Gas

Banking

The fourth quarter (Q4) of 2023-24 was mixed for banking, with public sector banks (PSBs) outperforming private sector peers in net profit growth

Private sector banks such as ICICI Bank, Axis Bank, Kotak Mahindra Bank, and IndusInd Bank reported faster growth in loan books and gross interest income in Q4

In Q4, State Bank of India s net profit rose 24 per cent year-on-year (Y-o-Y), while Punjab National Bank's net profit increased by 159.8 per cent Y-o-Y

Earnings growth for PSBs was driven by a continued decline in provisions and contingencies for bad loans, along with faster growth in high-yield personal loans

Most banks, however, reported a contraction in net interest margins (NIMs) as interest expenses grew faster than gross interest income

Finance & Insurance

Pharma & Healthcare

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