Q1 Results Review: Earnings growth continues even as revenue slows; margins rescue
Also Read: Nifty EPS outlook for FY24 raised by 2.5% on strong Q1 results: Motilal Oswal; remains Overweight on financials, autos “BSE500 topline slowed further to 6% with nearly 30% of them posting topline contraction (usually happens during crisis). The slowdown is more pronounced in global oriented sectors (IT, chemicals), followed by low ticket consumption, while high end consumption and capex seem to be doing well," Nuvama Institutional Equities said.
High domestic real rates, slowing global economy, risks broadening the slowdown, it added. While the top line slowed, operating profit, or Earnings before interest, taxes, depreciation and amortization (EBITDA) growth for BSE500 (ex commodities and BFSI) accelerated to 22% as compared to 13% in Q4FY23 as lower input prices boosted margins.
However, analysts believe with input prices stabilising, the top line will be critical in shaping margins hereon. Among sectors, IT Services companies reported weak performance during the quarter with flattish median revenue growth QoQ in CC, in an otherwise seasonally strong quarter.
The weakness in key verticals continued through Q1 with BFSI and Retail reporting a median USD revenue decline of 1.2% and 0.4% QoQ, respectively, according to brokerage firm Motilal Oswal Financial Services. Read Jio Financial Services Listing LIVE Updates here The banking sector posted a mixed Q1FY24, driven by healthy loan growth and sustained improvement in asset quality.
However, margin trajectory reversed due to a sharp rise in funding costs. The automobile sector saw upgrades for FY24E largely to factor in the benefits of better gross margin, thus aiding overall profitability and commentaries related to a sequential improvement in exports.
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