Q4 Results Preview: India Inc to post subdued growth for 8th straight quarter, says Nuvama; overweight on THESE sectors

Q4 Results Preview: Earnings challenges that have persisted during 9MFY25 are expected to continue into Q4FY25E, according to a recent report from Nuvama Institutional Equities. The brokerage noted in its report that the revenue growth for its coverage (excluding Oil Marketing Companies (OMCs)) is anticipated to be subdued at around 6% year-on-year, marking the eighth consecutive quarter of low growth.

Furthermore, the weak revenue is impacting margins, resulting in profit growth slowing to just 1% (9MFY25: 6%). Profits are projected to remain sluggish in sectors like cement, FMCG, energy, and autos, while metals, chemicals, pharma, and telecom are forecasted to experience robust growth.

Additionally, the brokerage indicated that the anticipated profit recovery continues to be difficult to achieve, leading to a consensus that falls short. Nifty 50 EPS is expected to increase by 2% (6% in FY25 based on projections)—suggesting reductions to FY25 EPS itself. A weak conclusion to FY25, coupled with increasing global uncertainties, presents risks to the expected 13% growth in Nifty 50 EPS for FY26E.

The brokerage maintains an 'overweight' rating on private banks, insurance, telecommunications, pharmaceuticals, consumer goods, cement, and chemicals, while holding an 'underweight' rating on industrials, metals, IT, power, and PSU banks.

Top-line growth to remain subdued…

According to the brokerage, this is expected to mark the eighth consecutive quarter of top-line growth below 10%. While the top line has been lackluster in both FY24 and FY25, the factors contributing to this are different. In FY24, there was a decline in exports and low-end consumption, while in FY25, the slowdown was seen in BFSI, discretionary spending, and capital expenditures. By sector, the anticipated top-line performance is: i) strong (> 15% YoY) in EMS, internet, NBFCs, QSR, and consumer services; ii) moderate (10–15% YoY) in durables, FMCG, pharma, retail, industrials, and non-lending financials; and iii) weak (< 10% YoY) in IT, banking, metals, energy, paints, and cement.

…weighing on margins, resulting in weak profits

The brokerage indicates that EBITDA margins for the companies it follows (excluding commodities and BFSI) are expected to remain stable year-over-year, in contrast to the significant expansion witnessed in FY24. However, the PAT margin is currently declining due to increased depreciation from past capital expenditures and rising credit costs. Consequently, PAT growth is anticipated to be only 1%, compared to 4% year-over-year in Q3FY25 and 7% year-over-year in H1FY25—marking a sharp decline from the over 20% growth recorded in FY24.

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