ICICI Bank, Airtel, L&T, Dixon Tech, Coforge Among Motilal Oswal's Large, Mid & Small Caps; Q1 Results Preview

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Motilal Oswal Report

We expect our universe's earnings to grow 10% YoY, while those of Nifty would also grow by a modest 5% YoY in Q1 FY26. Excluding financials, the earnings are expected to grow 14% YoY and 6% YoY, whereas, excluding global commodities (i.e., metals and oil and gas), our Universe and Nifty are likely to report 6% and 4% YoY earnings growth, respectively, for the quarter.

The overall modest earnings growth is expected to be anchored by O&G (+42% YoY), Telecom (loss-to-profit), Technology (+7%), NBFC-Lending (+8%), PSU Banks (+5%), and Healthcare (+11%), which are likely to contribute 89% of the incremental YoY accretion in earnings. Conversely, Automobiles (-10%), Metals (- 4%), and Private Banks (-3%) are likely to contribute adversely to earnings.

Sales and Ebitda of our universe are likely to grow 4% and 10% YoY, while for the Nifty, we expect sales and Ebitda to improve 7% YoY and 6% YoY, respectively. Ex-Commodities, Ebitda of our Universe/Nifty is likely to grow 7%/6% YoY

Our financial Universe is expected to post a muted 3% YoY earnings growth, primarily due to weak performance by Private Banks and subdued growth from PSU Banks. The private banks sector is projected to report a second quarter of earnings decline (of 3% YoY) since Mar’20, while the PSU Banks Universe is likely to clock moderate earnings growth of 5%, the lowest in 20 quarters.

The earnings of Insurance Universe are expected to moderate to 4% YoY. NBFC-lending is likely to post modest 8% YoY growth (sequentially higher), and NBFC non-lending is set to record modest earnings growth of 11% YoY, the lowest in 10 quarters.

The O&G Universe earnings are expected to grow 42% YoY, fueled by OMCs.

The Telecom universe is likely to post the third quarter of profit of Rs 10 billion in Q1 FY26 (vs a loss of Rs 17 billion in Q1 FY25 and a profit of Rs 5 billion in Q4 FY25), mainly led by continued improvement in margins in Bharti Airtel.

The Capital Goods sector is projected to report a healthy earnings growth of 12% YoY, moderating from a high base of 28% YoY growth in Q1 FY25, marking the second consecutive quarter of posting less than 15%+ earnings growth after seven consecutive quarters.

The Healthcare universe is likely to report 11% YoY earnings growth, moderating after posting eight quarters of 15%+ earnings growth.

The Cement universe is expected to report strong earnings growth of 35% YoY in Q1 FY26. The sector is likely to clock the first quarter of earnings growth after four consecutive quarters of significant earnings decline

After a modest performance in Q4 FY25, the Real Estate universe is likely to deliver a strong quarter with earnings surging 40% YoY.

The Chemicals sector is likely to report a 10% YoY earnings growth, the second quarter of earnings growth after declining for seven consecutive quarters.

The Technology sector is likely to deliver modest earnings growth of 7% YoY in Q1, the lowest in five quarters, and marking the eighth quarter of single-digit growth

The Consumer sector is expected to post weak earnings growth of 3% YoY, following three consecutive quarters of earnings decline.

The Auto sector is likely to report a weak quarter with a 10% YoY earnings dip.

The Metals universe is projected to report a 4% YoY decline in profits after reporting four quarters of earnings growth.

We expect the Ebitda margin (ex-Financials) to expand 140 bp for the our Universe to 18.2%. Conversely, for the Nifty-50, the margin is likely to remain flat at 21.1% (ex-Financials) during the quarter.

In Q1 FY26, our large-cap/mid-cap universe is likely to register a PAT growth of 8%/21%, while the small-cap universe earnings during the quarter are projected to remain flat YoY. Moreover, sales for large-/mid-/small-caps are likely to grow 4%/ 3%/3% YoY, and their Ebitda would clock 9%/19%/6% YoY growth for the quarter.

Sales/Ebitda/PAT of our universe are likely to report a two-year CAGR of 6%/7%/6% over June 23-Jun’25.

FY26E earnings highlights: Our Universe is likely to deliver sales/Ebitda/ PAT growth of 5%/12%/14% YoY. The Financials, O&G, and Metals sectors are anticipated to be the key earnings drivers with 8%, 19%, and 11% YoY growth in FY26E, respectively. These three sectors are projected to contribute 52% of the incremental earnings for our Universe in FY26.

Nifty EPS cut for FY26E/27E: We reduce our FY26E/FY27E Nifty EPS by 1.2%/ 0.4% and expect it to grow 11%/17% YoY to Rs 1,122/Rs 1,308. The BFSI, Auto, Consumer, Healthcare, Metals, and Retail sectors have led to the majority of the earnings cut

Motilal Oswal Top Ideas:

Large-caps – ICICI Bank, Bharti Airtel, L&T, Kotak Mahindra Bank, M&M, Titan, Bharat Electronics, Ultratech, Macrotech Indian Hotels, and Tech Mahindra.

Mid-caps and Small-caps – Dixon Tech, UTI AMC, Suzlon Energy, SRF, Jindal Stainless, Coforge, Page Industries, Kaynes Tech, Niva Bupa, and Supreme Industries.

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