Why Motilal Oswal’s Gautam Duggad Is Worried About FY21 Earnings
For 2019-20, Motilal Oswal expects 8-9% earnings growth—a target which will likely be achieved due to higher earnings in Q4.
Most of India Inc. managed to meet expectations of earnings growth in the quarter ended December—a positive development in the current macroeconomic climate. But Motilal Oswal Financial Securities Ltd.’s Gautam Duggad thinks the corporates won’t be able to sustain the trend in the next financial year.
“Earnings upgrade to downgrade is still tilting more towards downgrade for FY21 and that’s a bit concerning because the expectations for the market for FY21, including ours, is quite high,” the head of research (institutional equities) at the brokerage told BloombergQuint in an interview.
Motilal Oswal expects corporate India’s earnings to grow 24-25 percent in 2020-21, from a top-down perspective. On a bottom-up approach, however, Duggad sees some downside as reality sinks into the market over the next six months.
“If you look at the ground reality and commentary coming from various sectors, it’s not yet suggesting that we are looking at a V-shaped recovery in consumption, investment or even export-oriented sectors,” he said.
For the current financial year, Motilal Oswal expects 8-9 percent earnings growth—a target which will likely be achieved due to higher earnings in the fourth quarter. “The expectations from fourth quarter are high because of some base-related factors in some large caps.”
Other Key Highlights
- BFSI continues to do well, adding around 40 percent incrementally to earnings.
- Earnings picture looks muddied due to consumption-related sectors.
- Lack of tailwind for consumption has created polarisation in the sector.
- Like Titan Company Ltd. on discretionary side and Pidilite Industries Ltd., Britannia Industries Ltd.
- Seeing a big impact on the discretionary side growth.
- Like Maruti Suzuki India Ltd. and Eicher Motors Ltd. among autos, although it is a tough road ahead for the sector.
- Follow a bottom-up approach and investing needs to be stock selective.
- Lupin Ltd. is part of our pharma portfolio, also like Ipca Laboratories Ltd. and Alkem Laboratories Ltd.
- Diagnostics story has been a miss for us due to regulatory headwinds.