Earnings expectations for the fourth quarter of the financial year 2023-24 (Q4FY24) are indicating a mixed bag of results across various sectors. Analysts predict that headline profit growth could be restrained due to several factors impacting different industries.
According to estimates, the net profits for the Nifty 50 companies are projected to rise by 4% year-on-year and 7% quarter-on-quarter. However, it’s noted that this growth rate is slower compared to previous quarters. Combined net profits for these companies are expected to cross Rs 1.8 trillion for the third time in the last five quarters.
On the revenue front, while there is an expectation of a 5.4% year-on-year increase, the growth rate is expected to be lower than in previous quarters. However, there might be an improvement in net sales growth on a sequential basis, primarily due to the performance of banks and oil and gas companies.
Sector-wise performanceThe slowdown in earnings growth is attributed to the end of gains from lower raw material prices and a slowdown in revenue growth across sectors. While certain sectors like automobiles, banks, and pharmaceuticals are expected to drive earnings growth, global cyclicals such as oil & gas and mining and metals might experience declines. This mixed bag of results underscores the diverse challenges and opportunities faced by companies across different sectors in the current economic landscape.Automobile manufacturers, banks, and pharmaceutical companies are anticipated to perform well, offsetting the modest numbers expected from the metals & mining sector. Automakers are expected to report robust growth in volumes and improved prices, especially in the two-wheeler and passenger vehicle segments. Banks are likely to benefit from lower provisioning as asset quality remains favourable. Additionally, pharmaceutical companies are expected to report a good quarter due to stable prices of generics in the US and brisk business in other markets.
IT seen weakHowever, the IT sector might witness unexciting revenues as companies continue to navigate through a weak discretionary spending environment and the spillover of furloughs from the previous quarter. While some software services companies could see a sequential fall in revenues, others may experience flat growth.Consumer demand remains subdued overall, except for premium products, indicating low-to-mid single-digit volume growth for most consumer staples companies. Although rural demand has recovered, revenue growth is expected to be muted, although profitability might be maintained as companies focus on cost management.
In the oil & gas sector, upstream companies are estimated to report a sequential rise in operating profits due to lower operating expenses, despite flat volumes and capped prices. Oil marketing companies (OMCs) are likely to see an expansion in blended marketing margins, driven by better margins on diesel and other products.
