The September quarter earnings season is nearing its end with most companies reporting results in line with the estimates. The reduction in corporate tax rates combined with various government announcements to revive troubled sectors in the economy has helped revive market sentiment. This has not only led to better-than-expected profit delivery but also restricted the pace of earnings downgrades.

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According to a report by Motilal Oswal Financial Services (MOSL), the earnings upgrade-downgrade ratio has been balanced so far, with 31 MOSL universe companies witnessing upgrades of more than 3 percent and 29 witnessing downgrades of more than 3 percent, indicating a revival in earnings momentum. In the Nifty universe, 10 companies have witnessed upgrades of over 3 percent, while only five saw downgrades.

Among sectors, MOSL noted that autos and metals have seen a 12-13 percent earnings upgrade, while the capital goods sector has seen a 7 percent earnings cut.

Top FY20E upgrades by MOSL include Maruti Suzuki (18 percent), Hero MotoCorp (10 percent), Bharti Infratel (8 percent), Bajaj Auto (7 percent), Bajaj Finance (6 percent), and Asian Paints (5 percent).

Meanwhile, the top FY20E downgrades include IOCL (16 percent), Dr Reddy’s (11 percent), Zee (8 percent), Axis Bank (7 percent), and IndusInd Bank (6 percent).

FY20 upgrades/downgrades of Nifty50 companies

*Source: MOSL Report

The report also noted that sales, earnings before interest, taxes, depreciation, and amortization (Ebitda), and profit after tax (PAT) of the companies under the MOSL universe, grew -0.3 percent, 7 percent, and 12.5 percent YoY, as against their estimates of 0.5 percent, 2.9 percent, and 1.5 percent YoY, respectively.

According to the brokerage, among the Nifty constituents, Maruti Suzuki, HCL Tech, and Tata Motors exceeded profit before tax estimates, while Indian Oil Corporation (IOCL) and Ultratech missed expectations. (Profit after tax surprised owing to corporate tax cuts).

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