The Nifty ended FY18 with profit growth of 7% and Nifty EPS for financial year 2018 stood at Rs 455, up 9% year-on-year.
The March quarter financial year 2018 earnings season exhibited a mixed picture, with a healthy performance from the Consumption and Commodity oriented sectors marred by a drag from Corporate Banks and Capital Goods.
The key highlight of the fourth quarter of 2018 results season was the continued pick-up in topline growth and margin expansion in an inflationary environment. However, higher provisions in PSU Banks and Private Corporate Banks led to a drag on the bottomline.
13 out of 19 sectors reported EBITDA in line or better than expectations. Autos and Capital Goods missed EBITDA estimates. 13 out of 19 sectors reported PAT in line or better than expectations. Autos, Capital Goods, Private Banks and PSU Banks missed PAT estimates.
EBITDA margin for the MOSL Universe (ex-Financials and OMCs) expanded 30 basis points year over year to 20.2% (estimates of 20.6%). fourth quarter of 2018 performance was entirely driven by Cyclicals. PAT for Defensives, Domestic Cyclicals and Global Cyclicals expanded 3%, (98%) and 28%, respectively.
Meanwhile, the hopes for a long-awaited earnings recovery in financial year 2019 stay intact.
We are estimating Nifty EPS for FY 2019-2020 at Rs 579 - Rs 693 versus earlier estimates of Rs 577- Rs 695, growth of 27- 20%. However, it is expected to be driven by a few cyclicals, and to that extent, has significant downside risks.
27% profit growth in FY19E is led by an expected rebound in profitability in corporate banks, driven by the bottoming out of asset quality. Excluding corporate banks (SBI, ICICI Bank, Axis Bank), Nifty profits are expected to post 19% growth for FY19.
SBI alone is expected to contribute 22% of incremental FY19 Nifty profits, while ICICI and Axis are expected to contribute 5% each.
Apart from corporate banks, other cyclicals which are contributing disproportionately to the expected Nifty profit growth in FY19 are ONCG and Tata Motors – these are expected to contribute 15% and 7%, respectively, in incremental profits for FY19.
Effectively five companies – SBI, ICICI Bank, Axis Bank, ONGC & Tata Motors – are expected to drive 55% of incremental profits for FY19.
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First Published: IST