Q1FY23 Review: The corporate earnings during the April-June quarter of the financial year 2022-23 were a miss after several quarters, brokerages said, adding that the auto along with Oil & Gas dragged the results expectations most. 

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Some heavyweights – Reliance Industries, Tata Motors, and oil marketing companies like BPCL, and HPCL – from cyclical sectors drove the aggregate miss even as the spread of the earnings and accompanying corporate commentary was good, domestic brokerage firm Motilal Oswal said in its report. 

Good monsoons and a normal festive season after two years should augur well for consumption-oriented sectors. However, the growth is still lopsided and is being led by BFSI (Banking, Financial Services, and Insurance), the brokerage said. 

As the benefit of the recent moderation in commodity cost starts to accrue in the second half of FY23E, Motilal Oswal expects other sectors like Consumer, Autos, and Cement to contribute too. 

The upside from here on will be a function of stability in global and local macros and continued earnings delivery against expectations, Motilal Oswal said. It maintained an Overweight stance on BFSI, IT, Consumer, Telecom, and Auto with an Underweight/Neutral stance on Energy/Metals/Healthcare. 

According to Prabhudas Lilladher, “Categories like Paints, Building Materials, Multiplexes, Apparel, Retail, QSR, PV, Tractors, Hotels and Tourism, Capital Goods consumables among others reported strong pent-up demand.” 

Rural slowdown sustained as high inflation and volatile environment kept sentiment subdued, the brokerage said, adding that the Capital Goods, Hospitals, Agri Chem and Pharma had maximum beat in PAT (Profit After Tax) during the June-end quarter. 

Key sectoral highlights as per Motilal Oswal:  

Technology: Attrition inched up across the industry and remains a near-term concern.  

Private Banks: Loan growth has been strong, propelled by a recovery in the corporate portfolio, while growth in Retail, Business Banking, and SME segments continued to shine.  

NBFCs: Momentum across Vehicle and Mortgages remained strong. Margin impact hasn’t reflected yet, while an improvement (or stability) in asset quality in a seasonally weak quarter was heartening.  

Consumer: Price hikes continue to drive revenue growth as volume growth remains muted. Even as high inflation led to a tightening of consumer wallets, discretionary demand remained strong.  

Automobiles: The quarter under review was a mixed bag, with a recovery in volumes across segments on a low base of 1QFY22, aided by an improvement in the supply of semiconductors. 

Oil and Gas: While GRMs were very strong for OMCs, it was offset by higher losses in marketing margin. Hence, companies reported higher losses in 1QFY23. 

The top earnings upgrades in FY23E: COAL (21%), TATA (13%), HNDL (11%), UTCEM (8%), and UPL (8%). The top earnings downgrades in FY23E: BPCL (-70%), TTMT (-62%), ONGC (- 21%), APHS (-17%), and SRCM (-15%). 

The market has bounced back smartly in the last one-and-a-half month, wiping out its entire decline YTD (Year-To-Date). The Nifty is trading around 2 per cent higher YTD and is strongly outperforming global markets, despite a sharp FII selling from October 2021 to June 2022.