Earnings Wrap Q3FY22: Growth momentum continues unabated in Q3FY22 - ICICI Direct

• Corporate performance (ex-financials) for October-December 2021 (Q3FY22) came in encouraging with topline growing 13% QoQ. On the operating profit front, sequential growth was at 12% amid ~20 bps decline in operating margins to 17.6% on the back of higher RM costs (up 220 bps QoQ) partially mitigated by operating leverage benefits (employee costs and other expenses down ~100 bps each). On the PAT front, earnings were up 7.3% QoQ, constrained by lower other income and higher effective tax rate (27.5% in Q3FY22 vs. 23.2% in Q2FY22). On a YoY basis, topline, bottomline growth at the index level was healthy at ~30%+ tracking commodity prices led outperformance in the metals and oil & gas space as well as healthy high double digit growth witnessed in the IT & FMCG domain. With governmental thrust on infrastructure (capex outlay for FY23E up 35% YoY), private capex cycle revival and healthy job creation, the management commentary was optimistic of a strong rebound in FY23E
• At the Nifty level (including financials), broader trend continued i.e. lower double digit QoQ growth in sales & high single digit growth in PAT. PAT was a tad higher (at 8.8% QoQ) than ex-financials data shared above (7.3% QoQ) due to better performance by corporate banks
• On the sectoral front, in the BFSI space, asset quality improved sequentially as lower slippages and better recoveries helped overall performance. GNPA ratio for banks in our coverage declined in the range of 30-150 bps with overall decline of 45 bps QoQ to ~5%. Restructured book also declined by an average of 25 bps QoQ, thus indicating overall reduction in stress. IT companies continued their growth momentum in Q3 where the company reported strong growth in revenues in CC terms. Tier I companies reported average constant currency growth of 20.2% on a YoY basis. For Tier II companies, the growth was even stronger at an average of 26.6% on a YoY basis
• Going forward, revisiting our index earnings estimates, we expect Nifty EPS to grow at 21.5% CAGR in FY21-24E. Hence, we value Nifty at 20,000 i.e. 23x P/E on FY23E-24E average EPS of Rs. 870/share. Corresponding Sensex target is at 66,600, offering healthy double digit upside

For details, click on the link below: Link to the report

Source : Equity Bulls

Keywords

EarningsWrap Q3FY22 ICICIDirect