Q2 results preview: Expect limited revenue surprises amid stable growth, says Macquarie | Stock Market News
Source: Live Mint
Q2 results preview: The Q2 earnings monitor report from Macquarie Equity Research noted that, like in the first quarter, there is a higher number of companies reporting earnings below expectations in the second quarter, particularly in the Consumer Discretionary, Materials, and Financials sectors.
According to the brokerage, overall, the general opinion is that there is no decline in earnings, and there is still an expected 15% two-year EPS CAGR (EPSg) for MSCI India. It’s important to note that the outlook for India’s EPSg is neutral compared to that for emerging markets (compared to the usual premium from +400bps), and the growth premium compared to China is consistent with the average since 2010.
The brokerage foresees limited positive surprises in revenue for the future, as significant upward revisions are not expected, although there is a slight anticipation of improvement in IT and Healthcare. Macquarie Equity Research is optimistic about potential margin gains in IT but concerned about the assumed operating leverage gains for Autos and Industrials.
Sector expectations for 2Q by Macquarie Equity Research
Financials
The brokerage anticipates that bank net interest margin (NIMs) will remain stable or experience a slight decrease, while credit costs are expected to be consistent with 1Q levels, except for Axis Bank. Non-Banking Financial Companies (NBFCs) are likely to experience a slowdown in growth. The focus will be on commentary related to unsecured lending growth and the quality of assets. Insurance companies are expected to continue experiencing reduced Value of New Business (VNB) growth due to margin pressures.
The brokerage anticipates that there will not be a substantial increase in 2QFY25 growth until new IT budgets take effect in January 2025. We expect to see stronger hiring in 2QFY25 as the indicator that companies are gearing up for an increase in demand in CY25.
Consumer
The brokerage anticipates a low-single-digit volume growth in most consumer staples for 2QFY25 based on the pre-quarterly updates and brokerage dealer checks, which indicate a slow rural recovery and reduced growth in some sectors due to floods. In the upcoming quarters, 2W in the autos segment is expected to continue growing faster than passenger vehicles (PVs). The festive season will be crucial for PVs, as high post-festive inventory could result in increased discounts in 3Q.
Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
