2QFY23: Earning update

06 Dec 2022

BSE 100 2Q’23 earnings declined 6% on a YOY basis with an estimated Nifty EPS for FY 23 down by 5%since June 23. Despite lowers estimates on FY23 EPS, FY 24 estimate EPS remains largely unchanged. EX commodities EBITDA/Earnings were up 16% and 32% YOY. In first half of FY 23 witnessed retails outflow as well as moderation in DMF inflows.

Citi analysts expect upside risk of 5% provided fed can tame inflationary pressure while avoiding a recession and downside risk: -10% if inflationary pressure continues and is added by recession, supply shock etc. Our Dec 23 Nifty target is 18300, implying 18X 1-yr forward multiple, +3% on EPS changes.

Key Highlights

• 1. 2Q Earning Trend:
  

  Ex of commodities earnings growth was strong, up 32% YOY (8% ahead of estimates) led by Financials due to lower credit cost. Healthcare, Consumer Discretionary and Industrials came in better than estimated at (please put in the figure). Given the lower-than-expected losses at OMC’s - the Energy EBDITA/Earnings were also better than estimated.

   

Fig 1: BSE -98/100: Recent Earning Trends (%Y/Y)





Fig 2: Bse-98/100: Headline Performance vs Estimates




• 2. FY 23 /24E NIFTY EPS Revision Trends:
  

  Nifty Earnings grew at 12 % CAGR over FY15 -23 With a downward revision to FY23 estimates and FY24 estimates remaining flat, Citi analysts expect FY24 EPS Growth estimate at 17-18% vs 13-14% earlier. Bullish case scenario for Indian Equities: possibility of weaker USD and India’s positioning in emerging market context may help strong inflows, difficult to assign probabilities, given variables involved. If that plays out the multiples could see further rerating @20X 1-yr forward and would imply a bullish case Dec-23 Nifty target of 20K.

Fig 3: NIFTY: 1 Yr forward Valuation





Fig 4: India Valuation Premium to EM




• Ownership:
  

  FII ownership declined 180 BPS FYTD and 20 BPS QoQ (Q2FY 23), despite US$6 bn inflow in Q2FY 23. For the same period DMF’s saw inflow of US$3bn led by equity (including Index and ETF) flows of US$8bn. FYTD the retail ownership dropped by 50 BPS, while DMF’s is up 50 BPS.

Fig 5: BSE 500: Sep’22 Ownership