Number of Nifty200 cos with double-digit profit growth down sharply in 4 quarters; will they recover in FY24?

However, a deeper analysis on the performance showed that the number of companies to have reported at least 25% growth in profits came down drastically in the March quarter, compared with the June quarter of 2022.

In the June quarter of 2022, as many as 91 companies reported a 25% growth in profits, but this number was down to 66 in the March quarter.

Further, as many as 106 companies reported over 15% growth in profits in the June quarter, but the figure reduced to 89 in the March quarter.

The first three quarters of FY23 was tough for a majority of companies as a sharp spike in commodity prices following Russia’s invasion of Ukraine increased cost pressures significantly and dented earnings.

Moreover, the skyrocketing inflation and highest-ever hike in interest rates hurt consumer sentiment considerably.

Commodity prices started easing only towards the end of December quarter and further in the March quarter, which helped several companies report a strong sequential as well as year-on-year growth in earnings. An analysis by PhillipCapital showed that while cost escalation was broad-based for companies and sectors, it was slower than the topline growth, resulting in a sharp expansion in operating margins.

Of the Nifty 200 stocks, six companies saw profits doubling year-on-year in the March quarter, four companies saw profits treble, and seven companies reported manifold rise in profits.

Life Insurance Corp of India, Punjab National Bank, Dr Reddy’s Laboratories, Samvardhana Motherson International, Ashok Leyland, Kansai Nerolac Paints, and Adani Green Energy are among the 7 companies mentioned above.

Of the Nifty 50 companies, 30 of them have reported a more than double-digit growth in profits in the March quarter.

FY24 better than FY23?

Market experts do believe that the current financial year will see earnings recovering further as cost pressures ease and companies start seeing volume-led growth in revenue. However, the impact of higher interest rates will weigh on the bottomline.

“Softer commodity prices and operating leverage should bode well for margins in the coming

quarters, while higher interest cost will put pressure on the bottom line,” PhillipCapital said.

While growth outlook for the banking pack remains promising for FY24, it has dampened for the information technology sector given the global macroeconomic headwinds. As a result, the aggregate earnings growth for Nifty 50 companies will be lower in FY24 compared to FY23.

Nifty earnings growth is projected by consensus to increase by 20% YoY in FY24, which for Jefferies India appears high on a head-line basis.

“For FY24, partly on a higher base in financials, domestic earnings growth is expected to slow down to 19%, but foreign-related companies should see 21% growth, with a rebound in metals and oil & gas sectors,” Jefferies said.

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