Corporate earnings for the second quarter of FY25 have been underwhelming, characterized by muted revenue growth and a decline in both profits and margins. While the Banking, Financial Services, and Insurance (BFSI) sector has demonstrated decent performance, non-financial companies continue to face significant challenges amidst prevailing headwinds.
An analysis of 227 companies within the 275-stock JM Financial coverage universe reveals that 45% have fallen short of estimates.
Furthermore, a review of consensus Earnings Per Share (EPS) estimates and target price revisions following Q2 results for the JM Financial coverage universe reveals the following insights:
EPS Revisions
> 66% of companies reported EPS downgrades for FY25.
> Among these, 40% saw EPS reductions exceeding 3%, 29% exceeding 5%, and 18% exceeding 10%.
Target Price Revisions
> 45% of companies experienced a reduction in target prices post-Q2FY25 results
Segment-Wise Impact
> For FY25 A higher proportion of mid-cap and small-cap companies reported EPS cuts across thresholds (>0%, >3%, >5%, and >10%).
> Specifically, 17% of mid-cap and 23% of small-cap companies reported EPS reductions exceeding 10%, compared to just 10% of large-cap companies.
“There is a slowdown in urban demand across FMCG, retail, auto and mall operators. Besides this, chemicals, consumer durables and building materials have seen a moderation in demand. MFIs, select private sector banks and NBFCs are witnessing stress in their unsecured book,” JM Financial said in a report.
Sectoral Trend
Microfinance Institutions (MFIs) and Oil Refining & Marketing witnessed a bad Q2, with 100% of companies in these sectors missing estimates. missing estimates.
Other sectors with significant earnings misses included Consumer Durables, Small Finance Banks (SFBs), Auto OEMs, City Gas Distribution, Telecom, Building Materials, and Retail.
Public Sector Banks (PSBs), driven by lower credit costs, along with the steel and mining sectors, benefiting from favorable raw material prices, delivered strong Q2 performances, with over 70% of companies surpassing expectations. The internet and pharmaceutical sectors also saw more than 70% of their companies outperform estimates.
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