Earnings growth is likely to be lacklustre for January-March 2018. Bottom-up aggregation of consensus estimates for Nifty companies suggests expectations of only 4 percent year-on-year earnings growth in Q4FY18, slower than the run-rate of 6 percent in the first nine months of 2017-18. That is despite revenue growth expectations inline with April-December 2017 trends of 12 percent year-on-year.
If Q4FY18 earnings expectations play out, full-year FY18 earnings growth will be in mid-single digits. The street has yet to cut its full-year earnings estimates to reflect the latest Q4 expectations, as full-year numbers still imply 10+ percent growth in FY18 – meeting this would require a solid beat in Q4. The consensus expects earnings pressure in Q4 for metals/mining and cement, while UBS expects pressure on banking sector earnings.
Sectorally, we expect automobile original equipment manufacturer margins to expand quarter-on-quarter in Q4FY18, as volume growth has been strong and companies have taken price increases to offset rising commodity prices.
We estimate volume-led revenue growth of 10 percent year-on-year for consumer companies.