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Significant downside risks to earnings in auto, consumer durables, says Gautam Duggad of Motilal Oswal

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Gautam Duggad, Head-Research, Instl Equities at Motilal Oswal Financial Services, in an interview with CNBC-TV18 said that he expects significant downside risks to earnings in auto, consumer durables sectors.

Gautam Duggad, Head-Research, Instl Equities at Motilal Oswal Financial Services, in an interview with CNBC-TV18 said that he expects significant downside risks to earnings in auto, consumer durables sectors.
However, he added that metal sector earnings are likely to witness no large changes in Q4.
“There has been no change so far because of what Tata Steel has done. Before Tata Steel reported the numbers, our earnings estimate was down by about 2 percent for FY22 and the post-Tata Steel the net earnings have seen an upgrade now, it is plus 2 percent. So that is how sharp the impact of Tata Steel number revision has been,” Duggad pointed out.
He added, “But clearly the risk to this number is significantly towards downside as we are seeing more and more states announce restrictions and lockdowns. Essentially, we are in sort of a national lockdown without being called so. So most of the commentaries that we have heard on the corporate side this quarter so far are pointing towards demand moderation, an extended period of plant shutdown so clearly risk remains on the downside to the FY22 estimates.”
According to Duggad, the auto sector may see the highest risk of downgrades demand is deferred due to lockdown and at the same time the commodity cost have gone up.
Apart from auto consumer durables will also see significant downward revision already, he added.
“The only sector which has escaped the earnings downgrade so far one is obviously metals where there has been a meaningful upgrade. Then NBFCs and cement have seen a marginal 2-3 percent upgrade,” Duggad further noted.
“Pharma has been flattish and the rest all sectors have seen -3 percent kind of a downgrade. So net-net that is how we have reached the number of 2 percent for upgrade largely driven by metals.”
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Market Movers

CompanyPriceChng%Chng
Sun Pharma773.95 70.95 10.09
Tech Mahindra1,209.55 81.75 7.25
Cipla920.05 36.95 4.18
Shree Cements28,265.75 626.80 2.27
Adani Ports674.50 14.85 2.25
CompanyPriceChng%Chng
Sun Pharma774.00 70.75 10.06
Tech Mahindra1,209.45 81.70 7.24
Power Grid Corp171.05 3.65 2.18
Bajaj Auto3,831.05 68.25 1.81
HCL Tech1,025.45 17.85 1.77
CompanyPriceChng%Chng
Hindalco444.80 -13.30 -2.90
Bajaj Finance6,228.10 -172.00 -2.69
SBI Life Insura1,098.60 -30.25 -2.68
Bajaj Finserv14,222.20 -376.85 -2.58
SBI431.80 -9.75 -2.21
CompanyPriceChng%Chng
Bajaj Finance6,228.90 -165.40 -2.59
Bajaj Finserv14,221.30 -369.15 -2.53
SBI431.70 -10.05 -2.28
Tata Steel1,433.75 -25.25 -1.73
Titan Company1,714.50 -25.60 -1.47

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