Nifty @ 20k: Top 10 companies estimated to show highest EPS growth in FY24-25

Data shows that analysts believe there will be some change of guards at who drives the earnings growth heer on. Metals are expected to spearhead earning momentum for the Nifty thanks to declining cost and stable prices. Oil & Gas will follow, led by declining crude oil prices.

The Nifty 50, riding on optimism over India’s superior growth and continuous inflow of domestic as well as foreign money, hit a significant milestone of 20,000 level on September 11 for the first time ever.

The positivity is reflected in not not just Goods and Services Tax  (GST) collections, private capital expenditure, credit growth, relatively better tackling of inflation but also superior earnings growth by listed companies. This has boosted the morale of investors.

In the last leg of the market rally, sectors such as banks, real estate, auto, consumer staples and infrastructure have delivered superior earnings growth. In FY23, Nifty earnings grew 16 percent over the previous fiscal year.

Superior growth is expected to continue for FY24 as well, followed by some moderation in growth in FY25, according to consensus analyst estimates available with Bloomberg. The analysts expect Nifty earnings to grow at a compounded annual growth rate (CAGR) of 18 percent.

Data shows that analysts believe there will be some change of guards at who drives the earnings growth heer on. Metals are expected to spearhead earning momentum for the Nifty thanks to declining cost and stable prices. Oil & Gas will follow, led by declining crude oil prices.

"Improving supply chains, declining commodity cost pressures, price hikes, etc. are expected to drive margin improvements across all sectors barring IT," said Jefferies in a recent note. This margin expansion is expected to contribute to 5-6 percent growth in earnings, with about two thirds of Nifty companies (excluding financials) likely to see better profitability in FY24, it added.

JSW Steel, which has among the most ‘sell’ call among Nifty 50 companies, will likely surprise in the next two years with its earnings per share (EPS) growing at a CAGR of 95 percent – from Rs 17.45 to Rs 66.52. Steel prices have stabilised since May amid lack of growth in China, which is one of the largest producers as well as consumers of steel.

Bharat Petroleum, state owned refiner and retailer of petroleum products, will likely be the second fastest growing companies in terms of earnings. From the peak in May 2022, crude oil prices are down significantly but the recent rise in prices pose questions over analysts expectations. Brent Crude Futures has risen past $90 against a low of $71 in June. Oil refiners tend to lose money when oil prices rise as their raw material cost rises.

Bharti Airtel, which boasts the industry leading ARPU (average revenue per use), is expected to see earnings growth at the rate of 52 percent. However, much of that growth will depend on any tariff hikes taken by the company in the upcoming period as well as growth and monetisation of its fiber and 5G services.

Beyond these top three names, Apollo Hospitals Enterprise, Axis Bank, UltraTech Cement, Maruti Suzuki India, Tata Steel, Bajaj Finance, Larsen & Toubro, Adani Ports & Special Economic Zone and Eicher Motors are expected to reports earnings growth at CAGR of 22-37 percent during FY23-25.

While names like L&T, UltraTech Cement and Adani Ports will be among the key beneficiaries of infrastructure push by the government, Bajaj Finance and Axis Bank will continue to gain from credit growth.

On the flip side, Coal India – after a superlative two years – will likely see a drop in earnings as coal prices have stabilised at a much lower level than previous year. Bloomberg data shows analysts expect its EPS to fall at a CAGR of 12 percent till FY25.

ONGC, which drills oil wells, will also see flat growth in the next two years given crude oil prices have fallen in the international market. Fertiliser maker UPL - which has been struggling for a while – and Power Grid are other two top names that will see slow growth in earnings.

Even though overall Nifty earnings are expected to rise, price to earnings (PE) has risen at an even greater pace, making some analysts sound caution.

“Investors should exercise caution when treading in the market. Nifty 50 PE now goes closer to 25, which by any standard isn't cheap. While markets are aggressive in terms of valuation, midcap and small cap stocks in particular, investors should clearly stay away from noise and make an informed choice,” said Srikanth Subramanian, CEO, Kotak Cherry.

“Meanwhile, the trajectory for broader markets from here onwards will depend on corporate earnings, inflation and interest trajectory, Oil Prices and of course the geopolitical situation, all of which, at this stage, augurs well for India.”

Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.