Street’s FY24 earnings projections seem ambitious. Will India Inc deliver?
RBI surveys point to healthy demand traction in Q1, which along with lower commodity prices (LME metal index down 17% year-on-year and Brent crude oil down by 30% year-on-year), is likely to result in mid-teen corporate earnings," said analysts at Antique Stocking Broking Ltd in a report dated 3 July. “Most of the sectors are likely to report in-line earnings, with a positive surprise likely in store for oil & gas (due to Russian blending and GRM) and cement (driven by strong volume growth)," it added.
Meanwhile, India's equity market is on a roll, driven by a continued inflow of foreign funds into Indian stocks, pushing benchmark indices to unprecedented highs. However, despite this buoyant mood, investors are advised to be cautious, especially when setting expectations from corporate earnings. According to a Systematix Shares and Stocks (India) Ltd report, the consensus is projecting a rise of 13-14% during FY24-FY25 in India Inc earnings. “Compared to the pre-covid trajectory the projected earnings per share has an average deviation of 70%, the highest ever," said the report.
This means that if companies fail to meet the Street’s expectation, then earnings cuts could be steeper. “Given the large deviation in corporate earnings in FY23 from the pre-covid trend, earnings projection for FY24 can undergo sharper correction of about 15% compared to the 4% correction in FY23.
The ongoing slowdown in private demand would imply downward reset in expectations across most sectors," the report added. Meanwhile, the Indian equity market continues to trade at a premium to emerging market peers.
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