Q4 results review: Banks, autos drive earnings; Nifty 50 delivers strong beat with 12% YoY net profit growth

The corporate earnings for the fourth quarter of FY24 were strong, with widespread outperformance across aggregates. The earnings beat was driven by domestic cyclicals, such as Autos and Financials, along with Healthcare, Capital Goods, and Cement, while global cyclicals like Metals and Oil & Gas dragged down overall profitability.

Nifty 50 delivered a strong beat with a net profit growth of 12% year-on-year (YoY). Five Nifty companies, HDFC Bank, State Bank of India (SBI), ONGC, Tata Motors, and Coal India, contributed 72% of the incremental YoY accretion in earnings. Ex-Metals and Oil & Gas, Nifty’s earnings grew 16% YoY.

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Nifty earnings per share (EPS) for FY24 increased 2.6% to ₹1,005 from ₹980 earlier, largely fueled by notable upgrades in ONGC, Coal India, and SBI. EPS for FY25E and FY26E also experienced upward revisions of 0.8% each to ₹1,142 and ₹1,327, according to brokerage firm Motilal Oswal. It now expects Nifty EPS to rise 14% and 16% YoY in FY25 and FY26. 

“India is currently experiencing a mini-Goldilocks moment due to solid macroeconomic conditions, healthy corporate earnings, peaking interest rates, moderate inflation print, and ongoing policy momentum. The Q4FY24 corporate earnings have exceeded our expectations, with the BFSI and Automobile sectors driving the overall performance. The Healthcare and Capital Goods sectors reported healthy earnings growth, providing further fillip to the overall earnings,” Motilal Oswal said in a report.

The margin tailwinds in the quarter ended March 2024 have ebbed from a high base, necessitating a recovery in revenue growth to boost earnings going forward. Nifty is trading at a 12-month forward P/E of 19.2x, at a 6% discount to its own long-period average (LPA). 

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Sectoral Trends

Banks: The banking sector reported a healthy performance in the March quarter, fueled by robust business growth and controlled provisions. Net interest margin (NIM) performance was mixed, with many banks reporting margin improvements. Credit growth remained healthy, supported by strong traction in the retail and MSME segments.

PSU banks continued to report strong improvements in operating performance. Net interest income (NII) growth also remained strong, which, along with steady fee income and treasury gains, led to healthy growth in net profit. 

Autos: Volumes (ex-tractors) in Q4FY24 grew 20% YoY, led by a healthy recovery in two-wheelers and a sustained growth in the SUV segment. Two-wheelers witnessed the highest growth of 26% YoY during the quarter, driven by a low base and strong demand for the 125cc+ segment, Motilal Oswal said.

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Consumer: MOFSL coverage universe posted revenue growth of 4% YoY in Q4FY24. The demand trends were largely stable, but most companies witnessed rural recovery, primarily towards the end of 4QFY24. After a lackluster demand trend in FY24, the commentaries from most management teams look promising, backed by a volume recovery in FY25. 

Oil & Gas: The overall performance of the Oil & Gas sector was in line with MOFSL estimates, mainly driven by OMCs, GAIL India, MRPL, and PLNG. OMC’s performance was boosted by marketing.

MOFSL’s model portfolio remains aligned with the key domestic cyclical themes amid a consistent backdrop of earnings growth. It remains Overweight on Financials, Consumption, Industrials, and Real Estate. The brokerage firm’s key preferred investment themes include Industrials, Consumer Discretionary, Real Estate, and PSU Banks. 

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