Stocks That Saw The Biggest EPS Upgrades And Downgrades For FY22, FY23
India Inc.’s earnings recovered from the disruptions caused by the Covid-19 pandemic, supported by cost cuts, tax benefits, interest rate reduction, lower debt and tighter working capital. That prompted analysts to upgrade estimates for the ongoing and next fiscal.
“Corporate profitability, which was witnessing a downtrend from 2008 to 2020, is now reversing. The profit growth is accompanied by improvement in return on equity to 20%-plus for listed India [stocks],” a Kotak mutual fund outlook report said.
Kotak Securities, however, cited monetary policy normalisation from early 2022, high valuations and potential short-term disruption to the economy from any increase in Covid-19 cases as headwinds for the market in the first half of next year. Jefferies remains optimistic on Indian markets and economy but considers commodity and energy prices as the key risks to corporate earnings.
Still, the consensus Nifty earnings are projected to rise 19% in FY23, after a 35% increase in FY22, according to a December report from Jefferies. While earnings for global commodities such as energy and metals may decline, the domestic economy earnings, led by financials (low non-performing loan ratios, pickup in loan growth), should drive growth, it said.
That reflects in overall upgrades in earning estimates.
So far this year, more than 55% of the 394 companies—for which FY22 consensus estimates were available on Bloomberg—saw an upgrade in adjusted earnings per share.
69.6% of the 359 companies saw an upgrade for FY23 estimated earnings.
Biggest FY22 Upgrades And Downgrades
Steel Authority of India Ltd., Tata Steel Ltd. and Jindal Steel & Power Ltd. are among the top 10 stocks that witnessed the largest earnings upgrades for FY22E in 2021.
Bandhan Bank Ltd., Poonawalla Fincorp Ltd. and V-mart Retail Ltd. are among the 10 stocks that witnessed the biggest adjusted EPS downgrades for FY22 in 2021.
Biggest FY23 Upgrades And Downgrades
SAIL, Ashoka Buildcon Ltd. and Tata Steel are among the top 10 companies that saw the biggest adjusted EPS earnings upgrades for FY23 so far this calendar year.
Sunteck Realty Ltd., Jubilant Pharmova Ltd. and HDFC Ltd. are among the 10 companies that saw the biggest adjusted EPS downgrades for FY23 so far in 2021.
Sector-Wise Upgrades And Downgrades
Metals, air freight and logistics, and capital market are among the top 10 sectors with the highest upgrades in adjusted EPS estimate for FY22.
While a jump in prices prompted the upgrades in the metal sector, strong volumes amid demand recovery bodes well for the logistics segment. Increased trading volumes in stock markets supported the capital market, including listed brokerages.
Consumer finance, automobiles and insurance companies saw the biggest earnings estimate downgrades for FY22.
A shortage of semiconductors hurt the sentiment for the automobile sector, while higher claims and an increase in operating expenditure weighed on the insurers.