Q2 Results FY25: 66% Companies See EPS Cuts, Small and Midcaps Struggle; PSBs, Pharma Outperform - Read Now

The second quarter of FY25 brought mixed results for corporate India, with 66% of companies reporting EPS downgrades, reflecting the challenges posed by muted revenue growth and shrinking profit margins. While Public Sector Banks (PSBs) and the pharmaceutical sector outperformed, small and mid-cap companies bore the brunt of the economic slowdown.

Key Highlights of Q2 FY25 Results

1. EPS Revisions:

   • 66% of companies within the JM Financial coverage universe reported EPS downgrades for FY25.
   • 40% of these companies faced EPS reductions exceeding 3%, while 29% saw cuts over 5% and 18% over 10%.

2. Target Price Revisions:

   • 45% of companies saw a reduction in target prices following Q2 results.

3. Segment-Wise Impact:

   • Mid-cap and small-cap companies were disproportionately affected, with 17% of mid-caps and 23% of small caps reporting EPS reductions exceeding 10%, compared to only 10% of large-cap companies.

Sectoral Performance in Q2 FY25

Underperforming Sectors:

• FMCG, Retail, Auto, and Mall Operators: Urban demand remained weak, impacting revenue and profitability.
• Chemicals, Consumer Durables, and Building Materials: These sectors saw a moderation in demand.
• Microfinance Institutions (MFIs) and Oil Refining & Marketing: 100% of companies in these sectors missed earnings estimates.
• Other underperforming sectors included Telecom, City Gas Distribution, Auto OEMs, Small Finance Banks (SFBs), and Retail.

Outperforming Sectors:

• Public Sector Banks (PSBs): Strong Q2 performance driven by lower credit costs, with over 70% of companies surpassing estimates.
• Steel and Mining: Benefited from favorable raw material prices, supporting profitability.
• Pharmaceutical and Internet Sectors: More than 70% of companies in these sectors outperformed expectations.

Demand Slowdowns in Key Areas

• Urban demand has slowed across sectors like FMCG, retail, and auto, with mall operators also witnessing reduced footfalls.
• Stress in the unsecured books of Microfinance Institutions, select private sector banks, and NBFCs is becoming evident.
• Building materials, chemicals, and consumer durables have been hit by weak demand trends.

Public Sector Banks and Pharma Shine

Public Sector Banks (PSBs) emerged as top performers in Q2 FY25, benefiting from reduced credit costs and robust loan growth. Similarly, the pharmaceutical sector continued to deliver, bolstered by consistent global and domestic demand.

Small and Mid-Caps Face the Heat

Small and mid-cap companies were hit hardest, with EPS cuts exceeding 10% for a significant portion of these stocks. This reflects their vulnerability to economic headwinds and sluggish demand trends compared to their large-cap counterparts.

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