Q3FY22 earnings: BFSI emerges standout sector; auto, cement, metal, consumer durable hit by RM inflation

Banking, financial services and insurance (BFSI) was the standout sector, while autos, cement, consumer staples and durables, specialty chemicals, healthcare and metals were impacted by sharp raw material (RM) inflation, said Motilal Oswal

Motila Oswal remains 'overweight' on BFSI, IT, consumer, metals and cement and 'underweight' on autos and energy. Source: Pixabay

Banking, financial services and insurance (BFSI) was the standout sector, while autos, cement, consumer staples and durables, specialty chemicals, healthcare and metals were impacted by sharp raw material (RM) inflation, said Motilal Oswal in its corporate earnings report for the quarter ended December 2021. Corporate earnings for q3fy22 were healthy given the context of unprecedented input cost headwinds, it says.

"Corporate earnings for 3QFY22 came in line with MOFSL expectations. However, several sectors reported a wide divergence due to sharp RM inflation," said the brokerage house.

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BFSI stood out as the sector was aided by improvements in loan growth and disbursements, while asset quality improved sequentially propelled by moderation in slippages as well as healthy recovery and upgrades.

Meanwhile, IT sector too witnessed robust USD revenue growth at 4.6% QoQ, while the deal pipeline remained healthy and hiring momentum offered further visibility on demand, highlighted the brokerage.

Nifty50 companies results in line with expectations

Also, the 49 Nifty50 companies that reported results so far posted in-line sales/EBITDA/PBT/PAT growth targets set by MOFSL. Among the Nifty constituents, 43% beat Motilal Oswal's PAT estimates, while 24% missed.

"With QoQ topline growth of 4.6%, IT Services companies, under Motila Oswal's coverage, also had a good quarter, while private banks and NBFCs – asset quality trends improved. Consumer – discretionary companies delivered strong double-digit topline growth and cement was adversely impacted by weak volumes owing to unseasonal rains while high energy costs took a severe toll on margins and profitability. After 12 quarters of growth, Healthcare saw the first decline in profits due to rise in raw material costs in the October-December 2021 quarter," said Motilal Oswal

Private Banks, NBFC, logistics, retail and utilities reported higher-than-estimated PAT growth, while autos, cement, consumer durables, healthcare and metals reported PAT below the estimate of the brokerage in the quarter ended December.

Sectors and triggers going forward

The brokerage feels going forward the focus will be on global central banks as inflation has persistently remained high in developed markets and oil has crossed USD90/bbl. The recent Geopolitical flare up pertaining to Russia-Ukraine unnerved the near-term sentiments as well.

"Despite the high inflationary environment, earnings have largely remained in line with expectations and Nifty FY22/FY23 estimates have not witnessed any material downgrades over the past six months," it said.

Motila Oswal remained 'overweight' on BFSI, IT, consumer, metals and cement and 'underweight' on autos and energy.

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