Muted sales growth and a drop in profits and margins have been the hallmarks of the second quarter of FY25’s disappointing corporate earnings. Notwithstanding the respectable performance of the Banking, Financial Services, and Insurance (BFSI) industry, non-financial businesses nonetheless confront formidable obstacles.
45% of the 227 companies in the 275-stock JM Financial coverage area have not met projections, according to a study.
Additionally, the following observations are revealed by an analysis of the JM Financial coverage universe’s consensus earnings per share (EPS) projections and target price changes in the wake of Q2 results:
EPS Revisions
- EPS downgrades for FY25 were reported by 66% of firms.
- Of these, EPS reductions of more than 3% occurred in 40% of cases, 5% in 29%, and 10% in 18%.
Target Price Revisions
- 45% of businesses saw their target pricing drop after the Q2FY25 results.
Segment-Wise Impact
- More mid-cap and small-cap firms reported EPS reductions for FY25 across all thresholds (>0%, >3%, >5%, and >10%).
- In particular, compared to just 10% of large-cap companies, 17% of mid-cap and 23% of small-cap companies reported EPS declines surpassing 10%.
“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
Oil Refining & Marketing and Microfinance Institutions (MFIs) had a poor Q2, with all businesses in these industries missing projections. Missing approximations.
Consumer durables, small finance banks (SFBs), auto OEMs, city gas distribution, telecom, building materials, and retail were among the other industries that saw notable earnings misses.
More than 70% of businesses exceeded expectations in Q2 thanks to strong Q2 performances from Public Sector Banks (PSBs), which were fueled by reduced lending costs, and the mining and steel industries, which benefited from favourable raw material prices. Over 70% of businesses in the Internet and pharmaceutical industries also exceeded projections.
