Earnings Growth in India: Sliding Nifty vs Rising CCP

Citations · 6

• “Nifty50's EPS growth was as high as 24% CAGR compared to its last 20-year (FY05-25) average of 10% CAGR. As revenge spending and the Government's infra capex growth fizzled away in FY25, the growth environment reverted to the more sedate levels we had last seen between FY13 and FY19. In this subdued environment, the Nifty50's earnings growth moderated to 6% in FY25.”

  p#8 · confidence 95%

• “During FY25, Marcellus' current CCP portfolio constituents delivered a weighted average EPS growth of 14% YoY, compared to Nifty50's EPS growth of 6% YoY”

  p#5 · confidence 95%

• “high valuations (21.2x FY26P/E for Nifty50 currently vs an average of 16.5x for the last 20 years)”

  p#9 · confidence 95%

• “cash generation (i.e. return on capital employed, ROCE of 23%-25%) and reinvestment of 80%-90% of their operating cash flows through capital allocation initiatives to drive profit growth”

  p#19 · confidence 95%

• “CCP's forward P/E multiple today is at ~25% discount to its last six year average, and is also near its lowest point since inception”

  p#18 · confidence 95%

• “Key factors which compressed earnings growth in FY25 for the CCP included a weak macro demand environment for consumption in general (same store sales growth of Trent, Metro Brands) and for home building materials in particular (Asian Paints and Astral); high competitive intensity (e.g. Asian Paints and CMS Info); supply side shortages (e.g. Metro Brands) and massive commodity price inflation (e.g. Tata Consumer in Tea).”

  p#5 · confidence 95%