Q1FY25 review: Nifty PAT growth lowest since June 2020, says Motilal Oswal, lists top earnings upgrades and downgrades

The April-June quarter (Q1FY25) earnings of Nifty 50 companies broadly came in line with expectations with a single-digit EBITDA and PAT growth, causing a cut in the earnings per share (EPS) of Nifty for FY25 and FY26, according to brokerage firm Motilal Oswal Financial Services.

HDFC Bank, Tata Motors, ICICI Bank, Maruti Suzuki, and TCS were the five companies which accounted for 127 per cent of the Nifty's year-on-year earnings growth. On the other hand, BPCL, JSW Steel, ONGC, Reliance Industries, and Grasim Industries had a negative impact on Nifty’s earnings, as per Motilal Oswal.

The brokerage firm highlighted that overall the Nifty 50 saw a 4 per cent year-on-year (YoY) growth in profit after tax (PAT) against its estimates of a 3 per cent growth. The index reported its first quarter of single-digit EBITDA growth of 5 per cent, the lowest in about four years.

"The last time Nifty posted single-digit EBITDA growth was in September 2020. Also, 4 per cent PAT growth is the lowest since the Pandemic quarter (June 2020)," said Motilal Oswal.

Oil marketing companies (OMCs) dragged Nifty's earnings, while earnings growth was led by the BFSI and auto sectors. Motilal cut the Nifty EPS estimate for FY25 by 1.7 per cent to ₹1,115, largely due to Reliance Industries, ONGC, and BPCL. The brokerage firm trimmed EPS estimates for FY26E also by 1 per cent to ₹1,316 from ₹1,330.

Upgrades in Infosys, Coal India, Tata Motors, and Maruti were offset by downgrades in ONGC, Axis Bank, HDFC Bank, ICICI Bank, and IndusInd Bank, Motilal said.

Top earnings upgrades and downgrades

According to Motilal Oswal, Coal India (10.8 per cent), Dr. Reddy’s Labs (6.7 per cent), Apollo Hospital (4.4 per cent), Adani Ports (4.3 per cent), and Tata Steel (3.3 per cent) featured among the top earnings upgrades in FY25E. On the flip side, BPCL (-16.3 per cent), Bharti Airtel (11 per cent), Hero MotoCorp (-9.4 per cent), JSW Steel (-8.2 per cent), and IndusInd Bank (-7.7 per cent) saw top earnings downgrades.

Overweight on PSU banks, consumption, industrials, real estate

Motilal Oswal believes earnings growth may moderate to nearly 15 per cent over FY24-26. The brokerage firm underscored that the Nifty is trading at a 12-month forward P/E (price-to-earnings ratio) of 20.1 times, near its own long-period average of 20.4 times.

Industrials and capex, consumer discretionary, real estate, and PSU banks are the key preferred investment themes of the brokerage firm.

"We remain overweight on PSU banks, consumption, industrials, and real estate. We recently raised IT to marginal overweight from under-weight, while we cut auto from overweight to under-weight. We also turned overweight on healthcare from neutral while maintaining our under-weight stance on private banks and energy within our model portfolio," said Motilal.

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