Telecom, energy sectors see sharpest earnings cut after Q1

The April-June quarter of 2022-23’s (FY23’s) earnings season has wrapped up. Subsequently, the benchmark Nifty has seen only a marginal cut in its FY23 and 2023-24 (FY24) earnings estimate, but telecommunications (telecom) and oil and gas sectors have seen sharp cuts.

The Nifty earnings per share (EPS) is estimated to grow 9 per cent year-on-year to Rs 785 in FY23, against an earlier expectation of 13 per cent growth to Rs 820.

Meanwhile, FY24 earnings estimates are revised downwards, marginally from Rs 935 to Rs 925.

The FY23 EPS for telecom stocks has been revised downwards by 27 per cent, while that of oil and gas has been cut by 18.2 per cent. With the exception of these two sectors, most other sectors have seen single-digit cuts in earnings.

The FY23 EPS for the automotive sector has been revised upwards by 28 per cent, underpinned by pick-up in two-wheeler demand and an improved outlook for passenger vehicles.

“A major disappointment came in from the oil and gas sector wherein marketing margins came in lower than estimated. However, capital goods, metal and mining, and the pharmaceutical space surprised on the positive side,” says a note by ICICI Direct.

The brokerage believes that the cut in earnings can be offset by a slight rerating of the Nifty Index by virtue of a thaw in commodity prices, consequent positive impact on inflation, and resultant modest rate hike.