After almost a year-long contraction, the Nifty 50 companies reported positive growth in the aggregate net profit in the second quarter of FY21. Most analysts and brokerages expect this earnings momentum to gain traction in the December quarter with a higher double-digit growth of up to 20 per cent, year-on-year, on easing restriction and higher demand owing to the festive season.
The brokerage expects sequential recovery in operating activities on account of opening up of economy and the strong festive demand during the quarter. "We see a strong pick-up in cyclical sectors to drive the earnings growth for the quarter. The quarter was marked by significant opening-up of the economy and resurgence of pent-up demand across the sectors," it says in a report. Based on their and consensus estimates, Axis forecast Nifty's Q3FY21 revenue, EBITDA and PAT to grow by (-)1 per cent, 12 per cent and 20 per cent, respectively. Adjusting for the oil & gas sector, these parameters are likely to grow by 11 per cent, 15 per cent and 23 per cent, respectively. Earnings momentum is likely to continue in Q3 with sharp y-o-y earnings growth seen in metals, cement & automobiles sectors while the earnings are likely to contract for the NBFC sector, the report says.
Antique Stock Broking
Antique expects recovery in earnings momentum to gain traction in Q3 as economic activities have started to normalise. "Excluding financials and sectors with volatile earnings and one-offs like commodities and telecom - Nifty50 revenue, EBITDA, PBT and PAT y-o-y growth is expected to be 9.8 per cent, 18.0 per cent, 14.5 per cent and 13.3 per cent (on free-float basis). Margin is expected to improve sharply from 18.2 per cent to 19.5 per cent mainly driven by metals and healthcare. Sectors which are expected to report sharp YoY earnings growth are metals, healthcare and cement; while earnings contraction is likely to be seen in NBFC and energy," it highlights in its earnings preview report.
PhillipCapital (India) Private
According to PhillipCapital Q3 earnings are estimated to be robust owing to festive season, easing of restrictions, and higher demand. It has pegged Nifty earnings growth at 7 per cent, y-o-y, ex-financials at 15 per cent and revenue growth at -3 per cent, ex-oil & gas at 16 per cent.
Kotak Institutional Equities
The brokerage expects net profits of the BSE-30 index to increase 2 per cent y-o-y and 12 per cent sequentially while that of the Nifty-50 index to increase 19 per cent both year-on and on quarter-on- quarter basis. "We expect Q3FY21 net profits of the KIE coverage universe to increase 47 per cent y-o-y and 18 per cent q-o-q," the report says.
Corporate earnings according to Motilal Oswal are likely to continue their recovery phase in Q3FY21 aided by a pick-up in both global and domestic macroeconomic activity. Vaccine rollout has changed the broader sentiments and is helping the demand recovery. The third quarter has also been characterised by demand side recovery due to the festive season as well as sequential drop in COVID-19 cases. "We expect EBITDA, PBT and PAT for Nifty to grow by 10 per cent, 9 per cent and 7 per cent y-o-y, respectively. Earnings growth would be led by cyclicals like metals and cement. Ex-metals and cement, Nifty EBITDA, PBT and PAT should post 7 per cent, 2 per cent and -0.5 per cent growth respectively. However, sales for the constituents are estimated to decline 2%, y-o-y - the sixth consecutive quarter of a sales decline - entirely dragged by oil & gas constituents. Ex-oil& gas, Nifty sales are expected to grow 7.7 per cent, highest in seven quarters," it points out in a report.