Abhishek Vasudev

Q4 earnings preview: As companies gear up to release their earnings for the fourth quarter of FY24, analysts at Antique Stock Broking expect a mixed bag of results across various sectors. Projections indicate that Nifty 50 companies, excluding financial, telecom, and commodity sectors, are expected to post modest revenue, EBITDA, and profit after tax (PAT) growth of around 7 per cent, 6 per cent and 6 per cent respectively on a year-over-year (YoY) basis. However, margins are expected to witness a slight decline of approximately 20 basis points (bps) to 19.8 per cent.Analysts foresee robust operating profit growth in sectors such as auto original equipment makers (OEMs), retail, cement, oil marketing companies, pharmaceuticals, and textiles. On the other hand, sectors including agrochemicals, metals, building materials, utilities, and FMCG are expected to lag behind.Within the industrial sector, analysts anticipate a healthy annual revenue growth of around 15 per cent, aided by normalised supply chains and swift execution. However, railway companies are expected to report a soft quarter primarily due to a high base effect.Defence companies are projected to experience strong revenue growth of 19 per cent on the back of improvements in the supply chain and execution. However, margins may face pressure due to changes in revenue mix and a high base.The infrastructure sector, with a focus on water, road, power, and railways, is expected to report low-teen earnings growth. Utilities coverage is likely to see mid-single-digit growth, while the cement sector is expected to benefit from higher volumes and lower costs offsetting weak prices, analysts at Antique Stock Broking said in a report.In the automotive industry, strong PAT growth of approximately 25 per cent is expected, supported by revenue growth and margin improvement. However, auto ancillaries may witness flattish revenue growth and sequential margin decline due to cost inflation and price cuts.FMCG companies are projected to report soft earnings growth, with demand trends remaining subdued, particularly in rural markets. Conversely, the consumer durables segment is expected to perform well due to a pickup in primary channel filling.The hospitality industry is forecasted to report robust results in Q4FY24, driven by seasonality and strong pricing, despite flat occupancies.Meanwhile, within the banking sector, strong loan growth and a benign credit cost environment are expected to support earnings growth, although net interest margin (NIM) may moderate sequentially.

Q4 earnings preview: As the information technology (IT) companies gear up to announce their fourth-quarter earnings, analysts foresee a challenging period marked by subdued revenue growth.

Continued margin pressure and elevated operational expenses are expected to be the primary drivers behind a flattish growth in Pre-Provision Operating Profit (PPOP) for the banks in upcoming quarterly earnings, analysts at IIFL Securities said. However, the subdued outlook is expected to be mitigated to some extent by low credit costs, which should contribute to a 4 per cent quarter-on-quarter (QoQ) growth in Profit After Tax (PAT).Loan growth, a key metric for the banking sector, has remained healthy, but experts foresee a moderation in FY25 due to regulatory tightening. The moderation is expected to stem from regulatory measures aimed at lowering the loan-deposit ratio and adjusting risk weights, indicating a shift in the lending landscape, IIFL Securities noted.On the deposit front, there has been a notable uptick in growth during the seasonally strong fourth quarter. The surge in deposit growth has led to improvements in Loan-to-Deposit Ratio (LDR) and Current Account Savings Account (CASA) ratio, signalling positive momentum within the banking sector.However, amid these developments, Net Interest Margins (NIMs) are expected to contract by 5-10 basis points Quarter-on-Quarter (QoQ) on the back of various factors including recent increases in Time Deposit (TD) rates, lower LDR, and deposit re-pricing.Operational expenses are set to remain elevated, driven by residual wage bipartite provisions and ongoing franchise investments. These factors are likely to exert pressure on the overall profitability of banks, leading to subdued PPOP growth, analysts noted.Despite these challenges, asset quality is expected to remain benign, with stable trends expected in terms of gross slippages and recoveries. The expected part reversal of Additional Tier 1 (AT1) provisions, facilitated by RBI relaxations, should further contribute to low credit costs and support PAT growth, analysts at IIFL said.Among the individual banking shares, IIFL Securities has downgraded Federal Bank to a ‘Reduce’ rating, citing various factors including potential fourth-quarter results, NIM pressures, and uncertainties around succession planning. On the flipside, there is optimism surrounding ICICI Bank, with expectations of positive earnings revisions driven by robust loan growth and moderated operational expenses.

Pharmaceutical companies are expected to report another strong quarter, driven by year-on-year sales growth in both the India and US, analysts at brokerage firm Sharekhan said in a report.In India, sales are expected to increase by 10 per cent despite the traditionally weaker season, attributed to several factors including a 12 per cent hike in the Wholesale Price Index (WPI) across National List of Essential Medicines (NLEM) and non-NLEM products, new product launches, a focus on chronic sales, and increased productivity of medical representatives (MRs). Sharekhan predicts that companies such as Torrent Pharma could see a 16 per cent year-on-year growth, while Sun Pharma and Lupin are expected to achieve 12 per cent growth each, driven by volume growth and aggressive hiring of MRs respectively.Meanwhile, the US market is projected to grow by 12 per cent, propelled by penetration into complex products and stability in price erosion in the base portfolio. Sharekhan forecasts a 9 per cent year-on-year growth in US sales to reach $2,128 million in Q4FY24, with contributions from specialty and niche products. However, excluding sales of gRevlimid, a drug used in treatment of certain forms of cancer, a decline of 3 per cent in constant currency terms is expected.The report reflects on the expected margin expansion, with EBITDA expected to grow by a healthy double-digit percentage, largely driven by factors such as product launches, diversification into complex/specialty products, stability in price erosion, and growth in the chronic portfolio. Sharekhan predicts that Strides could report the highest EBITDA margin also known as operating profit margin at 19.4 per cent, followed by Torrent Pharma at 32 per cent, Sun Pharma at 28 per cent, and Lupin at 20 per cent.In terms of the sector outlook, Sharekhan suggests a favourable risk-reward scenario for Indian pharmaceutical companies, citing opportunities such as rising loss of exclusivity (LOE) opportunities, long-term growth prospects in the US, and emerging opportunities in the active pharma ingredient (API) space. Despite ongoing challenges like higher R&D expenditure and USFDA inspections, Sharekhan believes that pharma companies have strong growth potential in the long term.Regarding valuation and picks, Sharekhan remains selective in the pharmaceutical space, preferring companies with better earnings growth visibility and stable valuations. In the large-cap space, companies such as Sun Pharma, Dr. Reddy’s, Zydus, and Lupin are favoured, while in the mid-cap space, Strides and Sanofi are highlighted as promising picks.

Goldman Sachs, a leading global investment bank, has initiated coverage on CreditAccess Grameen, a non-bank finance company focused on micro-finance business primarily in rural India. According to Goldman Sachs, CreditAccess Grameen is well positioned to capitalise on the expanded micro finance lending Total Addressable Market (TAM) and its efforts to diversify the customer base and loan book, aiming for more predictable and profitable lending growth in the coming years.The company has demonstrated a commendable track record across market cycles. CreditAccess Grameen forecasts a healthy 21 per cent Compound Annual Growth Rate (CAGR) in Profit After Tax (PAT) over FY24-FY26, outpacing Goldman Sachs’ coverage estimates of 15 per cent, analysts at global brokerage noted.The growth is likely to come on the back of a robust lending CAGR of 24 per cent, exceeding the system lending CAGR of 13 per cent. Additionally, CreditAccess Grameen is expected to maintain superior profitability with average Return on Assets (ROAs) of 5.6 per cent, attributed to a diversified loan book, market share gains, and industry-leading credit costs and operating efficiency.The micro-finance institution (MFI) sector, post-COVID, has witnessed significant growth and a rebound in profitability, with an estimated expansion of MFI-TAM by approximately 50 per cent to $136 billion. This growth trajectory aligns with Goldman Sachs' positive outlook on commercial retail, including MFIs, driven by better growth drivers, improved profitability, and asset quality outlook compared to consumer retail.Currently trading at 2.7 times Price-to-Book (P/B) and 12 times Price-to-Earnings (P/E) FY25E, CreditAccess Grameen's stock is considered at a discount of around 27 per cent to NBFCs within Goldman Sachs' coverage on P/E. Utilizing a relative P/E framework, Goldman Sachs values CreditAccess Grameen at 15 times FY25E EPS, implying a 3.4 times P/B ratio. This valuation reflects superior operating metrics, with a PAT CAGR at 21 per cent and an average Return on Equity (ROE) of 24 per cent over FY24-26E, surpassing the covered NBFC average.Goldman Sachs initiates coverage on CreditAccess Grameen with a buy rating for target price (TP) of Rs 1,788 per share, implying an upside potential of 25 per cent.

Iran-Israel conflict: In the wake of escalating military tensions between Iran and Israel, markets are bracing for potential disruptions in commodity

Goldman Sachs, the global investment banking firm has predicted a major uptick in India's power transmission sector. Goldman Sachs analysts suggest that the transmission capex cycle in India is set for a significant inflection point. Delays in grid access approvals for new projects and revisions in government capex targets are cited as key factors contributing to this expected surge in transmission infrastructure investment.According to Goldman Sachs, asset developers with robust balance sheets, strong free cash flows, and low cost of debt are likely to be in a favourable position to capitalise on the upcoming opportunities in the transmission sector. Additionally, equipment manufacturers with technology leadership and domestic manufacturing footprints are expected to benefit early from the revival in capex.The note outlines five key conclusions, underlining the magnitude of the transmission capex opportunity and its critical role in India's energy transition:Capex RequirementGoldman Sachs estimates that power transmission will account for major share of India's total energy transition capex requirement, exceeding $500 billion over the period from FY24 to FY50.Government SupportIndia's grid infrastructure is deemed crucial for the viability of new energy projects, with the government providing substantial financial support, including waiving central grid charges for renewables, estimated at around $270 billion.Cost ReductionWaiving grid charges has led to a reduction in the levelized cost of renewable energy sources, such as round-the-clock renewable and green hydrogen, by significant margins.Grid as a Transition EnablerViewing India's grid as a transition enabler rather than just infrastructure asset could maximize renewable energy penetration, leading to long-term benefits that outweigh incremental network costs.Battery Storage RisksDeclines in battery storage system costs pose a potential risk to the transmission intensity of renewables, requiring a substantial reduction of approximately 60 per cent from current levels.Goldman Sachs suggests that India could reimagine its grid infrastructure to facilitate the energy transition more effectively. By overbuilding transmission grids and offering free access to renewables, India could unlock new business models and accelerate decarbonisation efforts.The note also identifies potential risks, including global shortages in high voltage equipment and transformers in the near term, and competition from battery storage in the longer term.In terms of investment opportunities, Goldman Sachs highlights Power Grid as a top pick among asset developers and Hitachi Energy India among grid equipment manufacturers. However, Schneider Electric Infra is considered less favourable due to recent share price performance.

Billionaire Mukesh Ambani-backed Reliance Industries Limited (RIL) reported its quarterly earnings for the fourth quarter of FY24, showcasing resilience in the face of economic challenges.

Global investment bank Goldman Sachs has reiterated its buy call on Zomato for target price of Rs 240, indicating an upside of 30 per cent from Thursday's closing price.

The National Stock Exchange benchmark - Nifty 50 index hit a record high on Tuesday powered by gains in banking, auto and financial services shares. The Nifty 50 index rose as much as 140 points to hit record high of 22,783.35 and Sensex rose as much as 387 points 75,097.The fresh surge to record high for Nifty came as geo-political tensions eased between Iran and Israel eased amid strong earnings posted by Indian companies in march quarter, analysts said.As of 2:14 pm, the Sensex was up 383 points at 75,058 and Nifty index advanced 123 points to 22,766.Buying was visible across sectors as eleven of 15 major sector gauges compiled by the National Stock Exchange were trading higher led by the Nifty Auto index's over 2 per cent gain. Nifty Bank, PSU Bank, Private Bank, Financial Services, Realty, and Oil & Gas indices also rose between 0.7-2 per cent.On the other hand, select IT, metal and pharma shares were facing a mild selling pressure.Mid- and small-cap shares were also witnessing buying interest as nifty Midcap 100 index rose 0.75 per cent and Nifty Smallcap 100 index advanced 0.57 per cent.Mahindra & Mahindra was top nifty gainer, the stock rose as much as 5.2 per cent to hit record high of Rs 2,169 after it launched compact sports utility vehicle XUV - 3XO starting at Rs 7.49 lakh.IndusInd Bank, Power Grid, Shriram Finance, Hero MotoCorp, Bajaj Auto, HDFC Life, Axis Bank, Grasim and Bajaj Finserv also rose between 1.75-3.21 per cent.On the flipside, Tech Mahindra, Dr Reddy's Labs, HCL Technologies, Tata Steel, Sun Pharma, LTI Mindtree, JSW Steel and Bharti Airtel were among the losers.The overall market breadth was positive as 2,071 shares were advancing while 1,694 were declining on the BSE.