After a muted performance over FY12-20, the profits of PSU banks surged 12x to reach Rs 1.2 lakh crore in FY22, more than the sum of cumulative profits over FY15-21, said .
“A large part of FY12-22 was spent cleaning up the balance sheets of financials. This coupled PSU profits declined at 4% CAGR over FY12-20 and the BSE PSU index was 8% lower as of FY21 than in FY12,” the brokerage said in its
report.
“During the first half (FY12-17), profitability and market-cap performances were extremely tepid, with overall PSU profits declining at 5% CAGR and BSE PSU index generating returns at 3.3% CAGR. However, over the second half (FY17-22), PSU profits expanded at 22% CAGR while the BSE PSU index remained flat. Subsequently, the PSU index rose 17% post-April 2022,” the brokerage said.
The performance in the second half was fueled by a sharp 3x improvement in profits to reach Rs 3.3 lakh crore from Rs 1.1 lakh crore over FY20-22. About half of these incremental profits came from PSU banks alone.
BFSI’s contribution to the PSU profit pool has been quite stable at nearly 35% over the last couple of years, whereas, O&G’s contribution plunged to 35% in FY22 from 93% in FY18, Motilal said.
During 2017-22, corporate profit growth across sectors bounced back smartly, propelled by tax rate cuts, reduction in the banking sector NPAs and post-pandemic tailwinds after a weak two-year base.
“India’s earnings cycle witnessed a turnaround after almost a decade and continued to remain healthy amid the current macroeconomic challenges with heightened worries on rising interest rates, crude oil prices, and liquidity tightening that has kept the market volatile and jittery,” the brokerage said.
“We estimate an FY22-24 PAT CAGR of 8% for the PSU stocks having consensus estimates. For the said Universe, over 100% of the incremental profits would be contributed by BFSI (118%), followed by utilities (19%) and capital goods (4%). BFSI will lead earnings CAGR with 28%, followed by capital goods (+11%), and utilities (+9%),” it added.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
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