Financing, Capex, Discretionary Consumption Related Activities Drive Q1 Earnings: ICICI Securities

ICICI Securities Report

Around 62% weight within the NSE 200 universe has reported Q1 FY24 earnings so far and the YoY aggregate free float profit after tax growth stands at 41%.

Overall the number of beats are outpacing misses so far (62 beats, 39 misses, 18 neutral).

Our thesis that bulk of the demand in the economy is being driven by the cyclical recovery in capex, credit growth and discretionary consumption is getting incremental validation in the results so far.

Capex revival is further corroborated by strong domestic demand for commodities, although deflation in commodity prices has hurt commodity producers and is the single-biggest factor dragging down aggregate earnings growth.

The export front presents a mixed picture with weak outlook for IT services, but pharma surprising positively.

We expect the profit after tax /gross domestic product ratio to resume its upward trend and reach 4.8% in FY24E after the marginal dip in FY23.

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