In its recent earnings preview for the June quarter (Q1FY25), domestic brokerage Motilal Oswal Financial Services (MOFSL) forecast a 4 percent year-on-year (YoY) growth in Nifty50 earnings. Excluding global commodities like Metals and Oil & Gas (O&G), the Nifty is expected to see a 10 percent YoY earnings growth for the quarter. Sales and EBITDA for Nifty are projected to increase by 6 percent and 4 percent YoY, respectively. Excluding Oil Marketing Companies (OMCs), the Nifty’s EBITDA is expected to grow by 8 percent YoY.
MOFSL predicts that overall earnings growth will be primarily driven by domestic cyclicals, particularly the Banking, Financial Services, and Insurance (BFSI) and Auto sectors, with significant contributions from Metals and Healthcare.
While most companies are expected to show moderate earnings growth in the June quarter, the brokerage has identified four firms that are likely to report a double-digit decline in their net profit for Q1FY25. Let’s delve into the details.
Grasim Industries: According to MOFSL, Grasim is likely to post a 71.4 percent YoY decline in its net profit at around ₹100 crore versus ₹360 crore in the same quarter last year. However, its net sales are expected to jump 10.7 percent YoY to ₹69,000 crore from ₹62,400 crore in the year-ago period. The brokerage estimates Grasim’s revenue for the VSF and Chemical segments to increase by 6 percent and 5 percent YoY, respectively. Meanwhile, the EBITDA for the VSF segment is projected to grow by 22 percent YoY, with an operating profit margin (OPM) improvement of 1.6 percentage points to 12.5 percent. In contrast, the Chemical segment’s EBITDA is expected to decline by 17 percent YoY, with an OPM contraction of 3.5 percentage points to 13.2 percent, it added.
BPCL: MOFSL expects the OMC to post a 68.8 percent YoY fall in its net profit at ₹3,300 crore for Q1FY25 as against 10,550 crore in the same quarter last year. Meanwhile, its net sales are also likely to decrease 10.1 percent YoY to ₹1,01,540 crore in the quarter under review from ₹1,12,980 crore in the year-ago period. The brokerage predicts a refinery throughput of 10.3mmt and a reported GRM at USD8/bbl, with a blended gross marketing margin of ₹4/litre. It also estimates marketing sales (excluding exports) volumes of 13.3mmt (+4% YoY and 1%QoQ) during the quarter. Watch out for updates on the expansion of Bina refinery and construction of the new petrochemicals plan, it added.
JSW Steel: According to the brokerage, the net profit of the steel firm is likely to tank 38.3 percent YoY to ₹1,300 crore for Q1FY25 versus ₹2,300 crore in the same quarter last year. Meanwhile, MOFSL forecasts its net sales to be flat at ₹42,200 crore in the quarter under review. It expects the company’s QoQ margin improvement to be driven by coal cost moderation. Performance of domestic and overseas subsidiaries will be crucial as well as management commentaries on capex/timelines, stated the brokerage.
Tech Mahindra: MOFSL estimates the net profit of the IT company to fall 14.4 percent YoY to ₹800 crore for Q1FY25 versus ₹1,000 crore in the same quarter last year. Meanwhile, its net sales are also set to decline 1.5 percent YoY to ₹13,000 crore in the quarter under review from ₹13,200 crore in the year-ago period. Dollar revenue is expected to be muted, up 0.4 percent at $1,554 million as against $1,601 million last year. As per the brokerage, the communications vertical for the firm has bottomed out, and recovery could take longer. It further noted that deal wins are likely to be muted due to macro uncertainty and expects deal TCV to the tune of $500 mn in 1Q. Also, the margin is likely to improve slightly by 30bp QoQ, as the impact of cost-control efforts should start becoming visible, but it noted that weak growth is likely to keep margins under pressure. The outlook on margin and growth in the CME and BFS verticals will be the key monitorables, added MOFSL.
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