Indian corporates, after posting mostly inline April-June results, saw earnings downgrades outnumber upgrades under Jefferies Financial Group Inc.'s coverage.
Of the 63 companies under the brokerage's coverage that reported results, 43% exceeded analysts' estimates, following a similar trend across the past four quarters.
A total of 33% of companies performed below expectations, while 24% were in line with the estimates, according to a Jefferies' report on July 28.
The brokerage also reported earnings downgrades for 49% of the companies, with upgrades for 41%. Consensus earnings for FY24 were reduced by 0.5%, led by weak results in the tech sector, with an estimated growth of 18.6% still built in.
Margin improved in selective companies as a result of improving commodity costs over the past two quarters. However, the brokerage said gains had not fully been realised as supply chains continued to ease.
Sectoral Takeaways
Banking and Financial Services
Leading lenders like HDFC Bank Ltd., ICICI Bank Ltd., and Kotak Mahindra Bank Ltd. beat estimates with over 30%/15% profit-growth and loan growth, respectively.
Improvement in asset quality.
The net interest margin started moderating.
Information Technology
Companies reported weak results, with the exception of Tata Consultancy Services Ltd.
Revenues ranging from positive 1% to negative 4%, largely missing their estimates.
Guidance for the current fiscal also indicated a drop to mid-single digit growth.
Consumer Goods
Companies reported mixed results.
Hindustan Unilever Ltd. reported "disappointed" growth in Ebitda and volume at 8% and 3% respectively.
Colgate Palmolive India Ltd. and Asian Paints Ltd. reported "stronger results" with 28%/36% Ebitda growth respectively.
Rural demand improved for both HUL and Colgate.
Auto
Two-wheeler manufacturers Bajaj Auto Ltd. and TVS Motor Co. reported 42-27% growth in Ebitda on a year-on-year basis, led by a strong domestic performance despite an approximate 30% decline in exports.
Tata Motors Ltd. and Ashok Leyland Ltd. reported a significant beat on their estimates and jump in profit on margin/operating leverage.
Cement
Ebitda declined marginally on a quarter-on-quarter basis for UltraTech Cement Ltd. and Shree Cement Ltd., despite companies reporting a 8-20% volume growth.
Demand outlook for the current fiscal remains positive.
Pharmaceuticals
Dr. Reddy's Laboratories Ltd. and Cipla Ltd. reported strong results, with a growth in earnings estimates by over 10% due to moderation in US generic pricing trends.
Reliance Industries Ltd. reported mixed results with a marginal decline in Ebitda. The fall in operating profit was led by a 6% decline in Ebitda for the oil to chemicals segment due to weak refining margin and slow China demand.
Larsen & Toubro Ltd. reported a 57% order flow growth on a year-on-year basis. Managements maintained a positive outlook in their capital expenditure commentary.
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