SBI, Tata Motors top picks post Q1 results; experts see over 20% upside in 12 months
The Nifty50 posted a beat with EBITDA/PAT growth of 22%/32% YoY vs. expectation of 18%/25%. MOFSL Coverage Universe recorded the highest earnings growth in the last eight quarters, fuelled by domestic cyclical, such as BFSI and auto.
Healthcare has made a strong comeback with 24% earnings growth after six consecutive quarters of flattish earnings. Within Nifty, five companies (BPCL, SBI, Tata Motors, HDFC Bank, and ICICI Bank) contributed 100% to the incremental YoY accretion in earnings during the quarter. Among sectors, the banking sector posted a mixed 1QFY24, driven by healthy loan growth and sustained improvement in asset quality; however, the margin trajectory reversed due to a sharp rise in funding costs.
Most of the NBFCs (except HFCs) reported a sequential contraction in NIM, surpassing our initial projections. For a majority of the NBFCs, the principal reason behind this NIM compression was the substantial increase in borrowing costs. The quarter saw upgrades in the auto sector 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.
IT services companies reported a weak performance in 1QFY24 with flattish median revenue growth QoQ in CC, in an otherwise seasonally strong quarter. The weakness in key verticals continued through 1Q with BFSI and Retail reporting a median USD revenue decline of 1.2% and 0.4% QoQ, respectively. In the case of consumer companies, the overall performance was a mixed bag with a few companies reporting healthy volume growth while others posted healthy value growth during the quarter.
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