Corporate profits

Reliance Industries Share: Corporate Earnings Show Signs of Pressure in Q1; banks shine

Mumbai: The profitability of major Indian companies that have reported their first quarter results so far is showing signs of pressure. Analyst estimates for Nifty’s earnings per share (EPS) for FY23 were reduced by 1.85% to ₹858, mainly due to lower-than-expected results from some of the big companies like and . Excluding the banking, financial services and insurance (BFSI) sector, profits for Nifty companies, which have reported results so far, were down 1% year-over-year (Yo Y).

“Earnings growth in the June quarter 2022 was moderate and led solely by BFSI, which has so far generated 124% of incremental year-on-year earnings growth, helped by moderating credit costs,” said Gautam Duggad, head of research,

. “Oil & Gas and Autos lagged while the Metals and Cement sectors posted weak numbers as expected.”

Tata Motors saw its EPS estimate reduced by 25% last month, while its EPS estimate was cut by 16%. Wipro, , and , among others, have seen their EPS estimates drop 5-7% in the past four weeks, according to consensus estimates from Bloomberg.

Smart talk

Earnings for the 31 smart companies, including banks and financial firms, which have reported results so far, rose 12% year-on-year, driven mainly by the banking and financial sector. In recent quarters, earnings growth has been in the 12-20% range. However, in the current season, the number of downside surprises in earnings has exceeded the number of upside surprises. “So far, earnings cuts at the index level have been only marginal and held mostly by a few heavyweight companies,” said Sujan Hajra, chief executive of Anand Rathi. “While business sales growth continues to increase, margin squeeze due to rising raw material, fuel and wage costs has led to some bottom line disappointments.”

With global commodity prices falling, signs of recovery in the business investment cycle, relatively resilient domestic demand and corporate focus on profitability, analysts expect earnings to improve in during exercises 23 and 24.

“From a longer-term perspective, however, we remain confident of 14-18% annualized earnings growth for the Nifty 50 companies,” Hajra said.

Among Nifty stocks,

, Axis Bank, , , , , , Cipla, , and Tata Steel beat analysts’ earnings estimates; while , Tata Motors, HDFC, Shree Cement, Nestlé, Dr Reddy’s Labs, JSW Steel, Reliance Industries, Infosys, TCS, Tech Mahindra and Wipro missed earnings estimates.