March quarter results for FY22 in line despite raw material costs pressure - BFSI lead earnings growth trajectory, says brokerage

The March quarter results for the financial year 2021-22 (Q4FY22) so far have been in-line with BFSI (Banking Financial Service and Insurance) sector leading the earnings growth trajectory, a domestic brokerage house Motilal Oswal Financial Service said in its overall earnings review.

The Q4FY22 earnings so far depict a wide divergence between sectors – Consumer Staples and Durables, Cement, Auto, and Metals – adversely affected by rising raw material prices and those not directly impacted by rising prices are – Private Banks, NBFCs, and Technology, the brokerage said.

Private Banks’ asset quality continues to improve with moderation in credit costs and NPA (non-performing assets) ratios, while the restructured book also dropped sequentially, Motilal Oswal said. “The improvement was also led by moderation in slippages and supported by healthy recovery.”

“The IT companies’ results were a mixed bag, with overall revenue growth of 2.3 per cent quarter-on-quarter (QoQ). Tier II companies reported a better growth at 3.8 per cent QoQ when compared with the 2.1 per cent QoQ growth for Tier I companies,” the report said.

Sales growth of Consumer companies was largely driven by price hikes, as volumes for staple companies continued to remain weak, the brokerage reported. “Reduced demand led to lower volumes amid a highly inflationary environment, while grammage cuts were taken to pass on the material cost increases.”

Similarly, for Automobiles, Motilal Oswal said that the benign raw material costs, price hikes, and operating leverage led to the beat in 4QFY22 results for OEMs (Original Equipment Manufacturer).

The Nifty EPS estimate for FY22 has been raised 0.7 per cent to Rs 737 largely due to BFSI and Autos, the report noted. “FY23E EPS too saw a marginal upgrade to Rs 873 from Rs 870 earlier as upgrades in BFSI and Tata Steel have been offset by downgrades in Technology and Reliance Industries.”