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Earnings growth of Nifty stood at 9% v/s expectations of flattish earnings.
The aggregate performance was marred by a sharp drag from global commodities such as metals and O&G, which posted a 67% and 29% YoY earnings decline, respectively.
Excluding these, the Nifty posted a solid 33% earnings growth v/s expectations of 28%, respectively, fuelled by BFSI and autos. Along with metals and O&G, cement and healthcare sectors too dragged 2QFY23 earnings.
Profit for Nifty rose 9% YoY vs the estimate of flat growth fuelled by BFSI. Excluding BFSI, profit fell 3% YoY.
Heavyweights, such as
, , , , , , and recorded a stronger-than-expected performance, thus leading to the beat. On a three-year basis (2QFY20 -2QFY23), Nifty’s earnings posted an 19% CAGR.
The Nifty50 posted 15% earnings growth in 1HFY23. Excluding metals and O&G, Nifty posted 28% YoY earnings growth. For the full year FY23E/FY24 we expect Nifty EPS of Rs 837/998 – growth of 14%/19%, respectively.
During the quarter IT companies despite the challenging macro environment and continued supply headwinds reported in-line performance. Tier II companies posted better growth at 3.7% QoQ v/s 1.8% growth for Tier I companies.
Growth momentum in banks has remained strong over 2QFY23 propelled by healthy loan growth, margin expansions, and continued moderation in provisions.
Overall performance in consumers was majorly driven by value as volumes remained subdued on a higher base. While commodity costs have shown signs of stabilisation, many of them remain at high levels.
Gross margin pressure was higher than expected in 2QFY23. OMCs fared better than expected thanks to the relief from the government; CGDs disappointed.
Implied marketing losses (including inventory) for OMCs recovered to an average of Rs 0.7/liter owing to lower Brent prices even as OMCs did not exercise any price hikes during the quarter.
Thus, overall corporate earnings for 2QFY23 were better than our expectations, with Financials driving the quarter once again. Markets have bounced back smartly and wiped out the entire YTD’CY22 decline.
The Nifty is now up ~6% YTD’CY22. With this rally, Nifty now trades at 22x FY23E, comfortably above the LPA and offers limited upside in the near term, in our view.
We reckon the upside from hereon will be a function of stability in global and local macros and earnings delivery.
We have a positive stance on BFSI, auto, consumer and IT, and UW stance on energy, pharma and utilities. Here are our top picks on a 1-year basis:
Axis Bank: Buy | LTP Rs 859 | Target Rs 975 | Upside 13%
Axis reported a sequential uptick in business driven by margin expansion, growth in retail, improvement is asset quality, and strong footing in the credit card segment.
Retail business has strengthened, with its share improving to 58%, led by home loans. Axis’s focus remains on the three core areas of instilling a performance culture, strengthening its core, and building for the future.
We expect PAT CAGR of 38% over FY22-24E and RoA/RoE of 1.8%/18.1% in FY24E.
: Buy | LTP Rs 2,568 | Target Rs 3,210 | Upside 25%
has a strong runway for growth, given its market share of sub-10% in jewellery and the continued struggles faced by its unorganised and organised peers.
Its medium-to-long-term earnings growth visibility is nonpareil. Despite the volatility in gold prices and COVID-led disruptions, earnings CAGR has been stellar at 24% for the past five years ending FY22.
We expect this trend to continue, with a 31% earnings CAGR over FY22-FY24.
(Disclaimer: The author is Head – Retail Research, . Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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