![](\"https:\/\/im.rediff.com\/news\/2022\/dec\/20big-enterprises.jpg?w=670&h=900\")
<\/p>\nThe headline for corporate profit growth has been very encouraging in the July-September quarter (Q2) of 2023-24 (FY24), with the combined net profit of listed companies up by 38 per cent year-on-year.<\/p>\n
<\/p>\n
However, the earnings distribution has been very lopsided, with most of the growth coming from public-sector oil-marketing companies (OMCs), banks, non-bank lenders, automobile (auto) companies, and cement producers.<\/p>\n
By comparison, companies from information technology services, fast-moving consumer goods (FMCG), retail, and consumer durables were disappointed, experiencing a sharp slowdown in net sales growth and a relatively muted increase in reported net profit.<\/p>\n
FMCG and consumer durables companies also reported margin expansion in Q2FY24, but their overall gains were muted compared to OMCs, auto, and cement manufacturers.<\/p>\n
On the flip side, the corporate results for Q2 show a slowdown in revenue growth, especially in the consumer goods space.<\/p>\n
The big jump in earnings was driven by margin expansion, especially in manufacturing and industrial segments, resulting from a decline in raw material and energy prices.<\/p>\n
This raises a question mark over the sustainability of the current buoyancy in corporate earnings.<\/p>\n
However, market analysts remain upbeat about the future trajectory of corporate earnings, and brokerage commentary on the Q2FY24 results has been generally optimistic, focusing on earnings beats at the aggregate level.<\/p>\n
According to analysts at Motilal Oswal, the profit growth for the majority of companies under their coverage in Q2FY24 was either above initial estimates or in line with expectations.<\/p>\n
Of the 21 sectors under our coverage, aggregate reported profits in 10 sectors were above initial estimates, nine sectors were in line, and two sectors performed below our estimates.<\/p>\n
Of the 239 companies under our coverage, 92 exceeded profit estimates, 66 posted a miss, and 81 were in line, write analysts at the brokerage.<\/p>\n
This led to an upgrade in earnings estimates for FY24 by many leading companies in high-performing sectors. For example, Motilal Oswal raised their FY24 Nifty earnings per share (EPS) estimate by 1.1 per cent to Rs 996, from Rs 986 earlier.<\/p>\n
Many individual companies saw a double-digit upgrade in their earnings, which is positive for their stock price.<\/p>\n
Here are 10 stocks from the BSE 200 Index that saw the biggest upgrade in their EPS for FY24 based on the consensus estimates from Bloomberg.<\/p>\n
The biggest upgrade has been for top companies in sectors such as crude oil refining and marketing, auto ancillaries, retail, pharmaceutical, cement, power, and mining and metals.<\/p>\n
In this analysis, Business Standard<\/em> has restricted itself to firms with earnings upgrades of 10 per cent or higher for FY24.<\/p>\n Indian Oil Corporation<\/strong><\/p>\n Public sector oil refining and retailing major, Indian Oil Corporation (IndianOil), witnessed one of the biggest earnings upgrades by brokerages, posting better-than-expected second-quarter (Q2) results.<\/p>\n Despite a 13.4 per cent year-on-year decline in net sales during the period due to lower crude oil prices, IndianOil s earnings rebounded from a net loss of Rs 272 crore in Q2 of 2022-23 to a net profit of Rs 12,967 crore in Q2 of 2023-24 (FY24).<\/p>\n Brokerages anticipate this positive trend to continue in the second half of FY24, supported by benign global crude oil prices and relatively higher fuel prices in the domestic market.<\/p>\n According to Bloomberg estimates, IndianOil’s earnings per share is projected to be Rs 24.1 for FY24, compared to the earlier expectation of Rs 16.2 per share before Q2FY24 results.<\/p>\n Shree Cement<\/strong><\/p>\n Shree Cement emerged as one of the top-performing cement makers in the second quarter (Q2) of 2023-24 (FY24), reporting higher-than-expected margins and profits.<\/p>\n The cement major s net profit surged by 120 per cent year-on-year (Y-o-Y), while net sales increased by 15.7 per cent Y-o-Y in Q2FY24, driven by higher price realisation and a decline in fuel and power costs.<\/p>\n Earnings before interest, tax, depreciation, and amortisation margins expanded by 410 basis points to 21.6 per cent in Q2FY24 from 17.5 per cent a year ago.<\/p>\n On the downside, Shree Cement s sales volume fell slightly compared to earlier expectations by brokerages.<\/p>\n The company plans to increase its domestic grinding capacity to 80 million tonnes per annum (mtpa) in the next three years from around 50 mtpa currently.<\/p>\n Analysts now expect Shree Cement to report earnings per share of Rs 20.5 in FY24, up from the earlier estimate of Rs 17.8 before its Q2FY24 results.<\/p>\n Power Finance Corporation<\/strong><\/p>\n Power Finance Corporation (PFC), the public sector power project financier, experienced an earnings upgrade for 2023-24 (FY24) after reporting a higher-than-expected profit in the second quarter (Q2).<\/p>\n PFC s standalone net profit of Rs 3,847 crore, up 28.3 per cent year-on-year (Y-o-Y), and gross interest income of Rs 11,787 crore, up 17 per cent Y-o-Y, in Q2, exceeded expectations.<\/p>\n Earnings growth was driven by a rise in loan disbursements, higher interest rates, and a decline in provisions for bad loans.<\/p>\n Its 52.6 per cent subsidiary REC also performed well in Q2, with 38.3 per cent Y-o-Y growth in net profit and 16.5 per cent Y-o-Y growth in gross interest income.<\/p>\n According to Bloomberg estimates, brokerages now expect PFC to report earnings per share of Rs 43.7 in FY24 on a standalone basis, compared to Rs 38.7 expected before its Q2 results.<\/p>\n LIC Housing Finance<\/strong><\/p>\n LIC Housing Finance reported better-than-expected earnings growth in the second quarter (Q2), led by higher net interest margins and lower operating expenses.<\/p>\n The home financier s net profit rose by 290 per cent year-on-year (Y-o-Y) to Rs 1,188 crore, while gross interest income increased by 32.8 per cent Y-o-Y to Rs 6,752 crore in Q2.<\/p>\n According to YES Securities, overall disbursements were 35 per cent higher than the first quarter of 2023-24 (FY24) at Rs 14,700 crore, indicating stabilisation of branch operations after the newly introduced technology platform.<\/p>\n The management has retained its expectation of delivering 12 per cent-plus loan growth in FY24, implying 5 per cent-plus quarter-on-quarter growth in the second half of FY24.<\/p>\n Analysts at Prabhudas Lilladher estimate loans to grow by 7-8 per cent annually during 2022-23 through 2025-26 due to heightened competition from banks.<\/p>\n According to Bloomberg estimates, analysts now expect LIC Housing to report earnings per share of Rs 81.4 in FY24, about 12 per cent higher than Rs 72.6 expected before Q2 results.<\/p>\n Torrent Power<\/strong><\/p>\n Torrent Power reported muted growth in net profit and net sales in the second quarter (Q2), but the performance beat Street expectations, leading to earnings upgrades by brokerages.<\/p>\n The integrated power company s net profit increased by 9.2 per cent year-on-year (Y-o-Y) to Rs 526 crore, while net sales grew by 3.8 per cent Y-o-Y to Rs 6,960 crore in Q2.<\/p>\n According to IIFL Securities, earnings growth was led by a ramp-up in renewable energy capacity and higher revenues from the power distribution segment, offset by lower liquefied natural gas (LNG) trading gains at its independent power plant.<\/p>\n Analysts have now upgraded Torrent Power s 2023-24 (FY24) earnings to reflect higher earnings in the second half of FY24 from an improved outlook on its gas-fired power plant.<\/p>\n Analysts see further upside in earnings if LNG prices remain benign.<\/p>\n They now expect Torrent Power to report earnings per share of Rs 52 in FY24, 12.5 per cent higher than the earlier estimate of Rs 46.2.<\/p>\n MRF<\/strong><\/p>\n The country s largest tyre maker beat estimates comfortably in the July-September quarter, with its operating profit growing by 142 per cent, led by better-than-anticipated gross margin.<\/p>\n Brokerages have increased their earnings estimates for the current financial year (2023-24) as well as the next (2024-25) to factor in the benefit of lower raw material costs.<\/p>\n While demand from automobile makers should remain strong, replacement demand for the tyre industry is expected to recover gradually as economic activity gains pace.<\/p>\n MRF’s competitive positioning in the sector, however, has weakened over the past few years, which is reflected in the dilution of pricing power in passenger cars and truck\/bus radials, say analysts.<\/p>\n Further, the impact of the planned capacity expansion should limit the increase in return ratios in the near term, says Motilal Oswal.<\/p>\n Trent<\/strong><\/p>\n Even as overall consumer demand remains weak, this Tata Group company beat expectations with revenue growth at 59 per cent year-on-year (Y-o-Y) compared to its four-year annual growth of 37 per cent.<\/p>\n The beat was also reflected at the operating level, with standalone operating profit rising by a sharp 72 per cent Y-o-Y.<\/p>\n The profitability gains were on the back of store productivity, with fashion same-store sales growth growing by 10 per cent Y-o-Y and gross margins improving on a sequential basis.<\/p>\n Axis Securities expects strong sales growth to continue in the coming quarters as Trent focuses on rapid store expansion and continued assortment renewal, resulting in a rise in overall footfall.<\/p>\n What is even more critical is the improvement in the earnings profile across all formats, the reduction in losses at Star Bazaar, and traction at the Inditex joint venture that runs Zara stores.<\/p>\n Lupin<\/strong><\/p>\n The drug major s operating and net profit performance beat consensus estimates by as much as 25 per cent on the back of a robust performance of the US business.<\/p>\n The launch of the generic version of the chronic obstructive pulmonary disease drug, Spiriva, and healthy margins helped Lupin improve its operating performance.<\/p>\n The company is positive on the future outlook, especially in 2025-26, given that it has lined up a raft of big-ticket launches in the US.<\/p>\n Excluding the anti-diabetic portfolio, the domestic business is expected to grow in healthy double digits, driven by recent additions to the field force.<\/p>\n JM Financial has reiterated that the outlook remains positive on the back of improving US visibility, margins, and compliance efforts.<\/p>\n However, the brokerage has a hold rating given demanding valuations.<\/p>\n Coal India<\/strong><\/p>\n After a healthy July-September quarter performance, brokerages have increased their operating profit estimates for India s largest coal miner for 2023-24 (FY24)\/2024-25 (FY25) to account for higher volumes, net sales realisation, and lower costs.<\/p>\n Although e-auction realisations are expected to cool down from FY24, higher volumes from e-auction and non-power sectors (that earn higher prices) are expected to support revenue growth.<\/p>\n India is lagging in its 2029-30 renewable energy target, and the Ministry of Power has set the FY24 electricity generation target at 1,750 billion units, of which the share of thermal power is expected to be over 75 per cent.<\/p>\n This augurs well for Coal India to achieve strong coal production in the next few years, says Motilal Oswal.<\/p>\n Its valuation at 6.6 times FY25 earnings estimates is also attractive, and the stock offers a 7-8 per cent dividend yield, according to Jefferies.<\/p>\n![](\"\/\/im.rediff.com\/money\/2023\/dec\/05dec-chart2.jpg?w=670&h=900\")
<\/p>\n![](\"\/\/im.rediff.com\/money\/2023\/dec\/05dec-chart3.jpg?w=670&h=900\")
<\/p>\n![](\"\/\/im.rediff.com\/money\/2023\/dec\/05dec-chart4.jpg?w=670&h=900\")
<\/p>\n![](\"\/\/im.rediff.com\/money\/2023\/dec\/05dec-chart5.jpg?w=670&h=900\")
<\/p>\n![](\"\/\/im.rediff.com\/money\/2023\/dec\/05dec-chart6.jpg?w=670&h=900\")
<\/p>\n![](\"\/\/im.rediff.com\/money\/2023\/dec\/05dec-chart7.jpg?w=670&h=900\")
<\/p>\n![](\"\/\/im.rediff.com\/money\/2023\/dec\/05dec-chart8.jpg?w=670&h=900\")
<\/p>\n![](\"\/\/im.rediff.com\/money\/2023\/dec\/05dec-chart9.jpg?w=670&h=900\")
<\/p>\n
![](\"\/\/im.rediff.com\/money\/2023\/dec\/05dec-chart10.jpg?w=670&h=900\")
<\/p>\n