1QFY25 results of BSE-500 Index companies show a converging trend between topline and bottom-line growth, as aggregate profitability appears to have peaked. Sales growth was at 8%, continuing the trend of single-digit yoy growth seen over the past five quarters. Consensus earnings estimates for the BSE-500 universe saw cuts, especially in commodities sectors.
BSE-500 companies witnessed 8%/1%/3% growth in revenues/EBITDA/PAT
1QFY25 results of BSE-500 companies show that revenue growth continues to remain weak at 8% yoy on aggregate and 9% yoy ex-OMCs (see Exhibit 1). EBITDA of non-financial companies of this universe increased a modest 1% yoy (16% yoy ex-OMCs), while PAT increased 3% yoy (11% yoy ex-OMCs); see Exhibits 2-3. Electric utilities, financials, healthcare, hotels & restaurants, retailing and real estate reported strong revenue growth. Exhibits 4-6 show sector-wise growth in revenues, EBITDA and PAT over 1QFY21-1QFY25.
Top-100 companies contributed 70% of BSE-500 revenues, but 76% of PAT
Exhibit 7 shows the contribution of the Top-100 companies (mostly large-cap. companies) to revenues, EBITDA and PAT of the BSE-500 universe. The contribution of the top-100 companies to revenues and PAT of the BSE-500 universe has been stable at around 70% and 75%, respectively. We note that the large-cap. and mid-cap. universes continue to deliver similar sales growth on aggregate, while the small-cap. universe in the BSE-500 stocks continues to lag significantly (see Exhibit 8). We note similar trend in EBITDA, even as yoy PAT trends somewhat converge for all three universes (see Exhibits 9-10).
Margins were down 60 bps yoy, but up 50 bps qoq
BSE-500 companies reported strong margins in 1QFY25, with EBITDA margin of companies remaining at elevated levels, despite a 60 bps yoy moderation (see Exhibit 11). However, margins had seen 150 bps yoy and 120 bps qoq expansion, on an ex-BFSI and oil & gas basis. Capital goods, consumer durables and apparel, gas utilities, internet software and services and telecommunication services were the major sectors witnessing sharp margin expansion in 1QFY25 (see Exhibit 12). Companies have been broadly able to manage RM costs as well as operating costs in the quarter, resulting in margin gains arising from operating leverage (see Exhibits 13-14).
Sharper downgrades in BSE-500 stocks in FY2025E
We note that consensus EPS estimates for BSE-500 stocks have seen sharper downgrades than upgrades for FY2025E, while the downgrades-to-upgrades ratio is more balanced for FY2026E and earnings are broadly stable (see Exhibit 15). We note that most companies featuring in top-20 downgrades and upgrades belong to the mid- and small-cap. universes, reflecting the low predictability in earnings of these set of companies. |
