Q2 results: About 44% of companies miss PAT expectations; Urban demand slows across sectors – ETCFO-OxBig News Network

The Q2FY25 earnings season has stirred concerns among investors as 44% of companies missed their Profit After Tax (PAT) expectations, according to an analysis of 157 companies within JM Financial’s coverage universe. The report indicates that out of the total companies reviewed, 69 fell short of earnings expectations, 65 exceeded forecasts, and 23 were in line with projections.

Key insights reveal that urban demand is slowing across various sectors, impacting FMCG, retail, automotive, and mall operators. About 27% of the companies reported weaker-than-anticipated revenue growth. Demand moderation has also been noted in chemicals and consumer durables, while microfinance institutions (MFIs) and select private banks and non-banking financial companies (NBFCs) face stress in their unsecured loan books.

Banking and Financial Services: Public sector banks benefited from recoveries that lowered credit costs and operational expenses. However, MFIs struggled with higher credit costs, and NBFCs along with private banks reported mixed results, with some missing estimates due to elevated credit costs.

FMCG and Retail: Large players are experiencing weakening urban demand, with raw material inflation outpacing the companies’ ability to implement price hikes.

Auto OEMs and Ancillaries: Original Equipment Manufacturers (OEMs) faced challenges from demand issues and rising raw material costs, though auto ancillary companies posted a stronger quarter.

Chemicals: Inventory pile-ups among customers and sluggish demand led to earnings misses, although select companies benefited from favorable revenue mixes and strong contract manufacturing revenue.

Oil Refining and Marketing & City Gas Distribution (CGD): Oil refining saw muted results due to weak Gross Refining Margins (GRM), while CGD companies missed estimates amid higher gas costs.

Real Estate, REITs, and Hotels: Real estate companies reported beats driven by timely project completions and robust inventory sales, while hotels saw strong performance and expressed optimism for Q3 with the upcoming wedding season.

EMS and Consumer Durables: Electronics manufacturing services (EMS) companies had a strong Q2, while consumer durable companies missed estimates due to weak demand, high raw material costs, increased advertising expenses, and impacts from Bureau of Indian Standards (BIS) regulations.

Building Materials: The sector broadly underperformed due to aggressive pricing from unorgansed players, lower utilization rates, and operating deleverage.

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