M UpdateIndia Equity Strategy | Asia Pacific3FQ24 Earnings – Final Cut: Another Good QuarterMorgan Stanley India Company Private Limited+Ridham DesaiEquity Strategist Ridham.Desai@morganstanley.com +91 22 6118-2222 Sheela RathiEquity Analyst Sheela.Rathi@morganstanley.com +91 22 6118-2224 Nayant ParekhEquity Strategist Nayant.Parekh@morganstanley.com +91 22 6118-1008 Exhibit 1 : Revenue and Earnings Growth Trends YoY Revenue growthQ3F23Q4F23Q1F24Q2F24Q3F24EQ3F24MS coverage18%14%5%4%2%5%MS coverage ex-energy18%16%15%11%9%9%Broad Market (1998 companies)7%14%6%5%5%Broad Market ex- OIL PSU10%14%11%9%7%BSE Sensex17%14%12%10%8%8%Nifty 5017%12%8%7%4%6%YoY Earnings growthQ3F23Q4F23Q1F24Q2F24Q3F24EQ3F24MS coverage7%24%60%45%20%23%MS coverage ex-energy12%22%36%30%22%22%Broad Market (1998 companies)-2%9%36%41%26%Broad Market ex- OIL PSU0%10%20%26%24%BSE Sensex7%21%31%27%13%15%Nifty 5010%18%32%27%12%13% Source: Company data, Capitaline, Morgan Stanley Research. E = Morgan Stanley Research estimates. Exhibit 2 : BSE Sensex: 3-year CAGR in Quarterly Net Profit Growth-10%-5%0%5%10%15%20%25%30%35%40%20012002200320042005200620072008200920102011201220132014201520162017201820192020202120222023BSE Sensex: 3Y CAGR in Quarterly Net Profit Source: Company data, Morgan Stanley Research Earnings growth trend remained intact in 3FQ24 as margins expanded for the 4th consecutive quarter. Revenue and Earnings growth beat our analysts' expectations albeit the breadth in earnings beat was at a 5-year low. Broad Market earnings outperformed the narrow market. Morgan Stanley coverage: For F3Q24, companies under Morgan Stanley's coverage reported revenue, EBITDA, PBT and net profit growth of 5%, 13%, 25% and 23%, respectively, vs. our analysts' expectations of 2%, 12%, 18% and 20%. EBITDA margin expanded for the 4th quarter running. Ex-Energy, revenue and net profit growth stood at 9% and 22%, respectively, in-line with our analysts' expectations. The earnings beat ratio fell to 5-year lows, at 42%, while relative stock outperformance post-earnings announcements was up QoQ, at 46% ( Exhibit14 ). Marginal beat on earnings: Sensex reported revenue growth of 8% YoY, in-line with our analysts' expectations while Nifty reported revenue growth of 6% YoY, a beat of 2ppt. Net profit growth for Sensex and Nifty stood at 15% and 13%, beating our analysts' expectations by 2ppt and 1ppt, respectively. Broad market revenue and net profit growth were 5% and 26% YoY, respectively, with margin expansion of 195bps ( Exhibit 30 ). Consumer Discretionary led the performance: Earnings growth was positive for nine out of ten sectors covered. Materials (ex-chemicals) and Consumer Discretionary reported the best earnings growth, while Technology reported a decline in earnings. Revenue growth was positive for nine sectors with Consumer Discretionary and Industrials reporting the fastest growth while Materials was the only sector to report negative growth. Consumer...
