SBI Securities anticipates a robust first-quarter earnings season for fiscal year 2027, marking a significant turnaround from previous periods of subdued growth. Sunny Agrawal, Head of Fundamental Research at SBI Securities, highlighted a broad-based revival in corporate earnings despite ongoing global economic uncertainties.
According to Agrawal, median sales, EBITDA, and profit after tax growth for companies listed on the BSE 500 and BSE 1000 indices ranged between 17-22 percent, making Q1 FY27 one of the strongest quarters in the last two years. He projects Indian companies to achieve double-digit earnings growth for the entire FY27, with mid- and small-cap segments poised for even better performance.
Banking and NBFCs Poised for Growth
The banking and non-banking financial company (NBFC) sectors are identified as prime candidates for strong performance over the next three to six months. Despite some mixed results from private banks, their balance sheets continue to expand at double-digit rates. While net interest income (NII) growth has been slower, Agrawal expects NII and core operating profit growth to accelerate as net interest margins stabilize.
Within the NBFC space, credit growth is projected to remain healthy throughout FY27, with many companies forecasting 15-25 percent growth in advances. SBI Securities recommends a 'buy-on-dip' strategy for select NBFCs.
Top NBFC Picks
- Shriram Finance: Expected to benefit from recent fund infusions by a Japanese conglomerate, potentially lowering borrowing costs and expanding net interest margins.
- Bajaj Finance: Despite strong recent numbers, any stock weakness is viewed as a buying opportunity.
Other NBFCs highlighted by SBI Securities include Mahindra & Mahindra Financial Services and Northern Arc.
Defence, Capital Goods, and Power Sectors
Defence companies are expected to maintain strong earnings momentum, particularly within the broader capital goods and engineering sectors driven by robust order books.
Key Stock Recommendations
- Bharat Electronics (BEL): Remains a preferred pick for SBI Securities, even after some profit booking following its quarterly performance.
- Larsen & Toubro (L&T): Continues to secure substantial order inflows across its diverse businesses, navigating challenges in regions like the Middle East.
In the power and power-ancillary segments, SBI Securities expresses confidence in specific companies:
- Siemens Energy: Despite underperforming in the previous quarter, its latest numbers were in line with expectations, suggesting potential for future improvement.
- Cummins India: While margin pressure impacted profitability, top-line growth was around 18 percent. Margins are anticipated to recover following the company's pricing adjustments, with SBI Securities setting a target price of Rs 6,500 for the stock.
Overall, SBI Securities believes the Q1 FY27 earnings recovery signals a significant shift, presenting compelling opportunities across banking, NBFCs, defence, engineering, and power-linked companies over the next 6 to 18 months.