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After seeing testing times in FY23 amid skyrocketing inflation and weak consumer demand, India Inc found solace in FY24 as several companies reported strong double-digit growth in earnings.

One of the major factors driving this growth was easing inflationary pressures.

As many as 234 companies, excluding banks and financial services, saw operating profit or EBITDA, growing faster than sales on a year-on-year (YoY) basis in each of the last three quarters of the current financial year, a screener run by ETMarkets showed.

Only those companies which have a market capitalization of over Rs 1,000 crore have been considered.

A majority of the companies are part of the midcap and smallcap segments. In fact, several companies in this segment saw profit growth outpacing that of their largecap peers primarily due to higher EBITDA.

Thanks to the strong earnings and upbeat market sentiment, stocks of more than 100 of the 234 companies have given multibagger returns of upto 755% so far in FY24.

The list also includes index majors such as Adani Ports & SEZ, Bajaj Auto, Hero MotoCorp, Maruti Suzuki India, Eicher Motors, Tata Motors, Cipla, Tata Consumer Products, Nestle India, Asian Paints, and JSW Steel.

Automobile companies topped the list of outperformers, as a sharp fall in input costs, robust volumes, and better realisations drove the EBITDA higher.

Tata Motors reported a 59% YoY growth in consolidated EBITDA in the recently concluded December quarter, with sales rising 25%, aided by a strong earnings of arm Jaguar Land Rover, which accounts for over 80% of the consolidated earnings of the company.

In the two-wheeler space, Hero MotoCorp reported a 48% YoY growth in operating profit in the last quarter, while sales grew by 21%.

Within the smallcap universe, companies like Jupiter Wagons saw a YoY growth of 222%, 142%, and 55%, respectively in EBITDA in the last three quarters. In the same period, sales grew by 155%, 111%, and 39%, respectively.

Multibagger GE T&D India, which makes industrial equipments, has also seen EBITDA growing faster than sales in the last three quarters, aided by strong order execution and easing costs.

Another smallcap company to see EBITDA growth outpacing sales was Neuland Laboratories. In the December quarter, the company’s EBITDA more than doubled YoY, while sales grew by over 45%. Aided by the consistent strong earnings growth, the stock has given 292% returns so far in FY24.

Thomas Cook India, a company which gained a lot of attention on Dalal Street due to a strong rebound in leisure travels post pandemic, also reported robust earnings in the last three quarters. Its EBITDA grew 82% YoY in the December quarter, while sales increased by 23%.

Will the trend continue?

The robust earnings growth for companies in the last three quarters was driven primarily by easing input costs, and analysts believe that this benefit will taper off in the coming quarters.

Kotak Institutional Equities’ Sanjeev Prasad pointed out that the high flying valuations of stocks is assuming very high profitability of companies.

High profitability in several consumption-sectors were on the back of steep price increases and sharp correction in raw material prices, but it remains to be seen if current high profitability will sustain given increasing competition across sectors, Prasad said.

For companies in the automobiles and cement sectors however, the brokerage firm expects profitability to be higher than historical levels in the next two financial years.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)

  • Published On Feb 21, 2024 at 04:00 PM IST

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