Banking, IT, Cement, Capital Goods, Metals And Mining, Specialty Chemicals Q2 Results Preview: IDBI Capital

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IDBI Capital Report

Banking and Finance - Credit growth moderates; NIMs seen under pressure

System non-food credit growth moderated to 13.6% YoY (Aug-24) versus 16% YoY (FY24) led by slowdown across the segments especially unsecured portfolio. Also, provisional numbers of banks suggest slowdown in credit growth on QoQ basis during Q2 FY25.

Retail portfolio growth moderated and stood at 13.9% YoY, led by credit cards, vehicle, and education loans while working capital loans for better rated corporates as well as gold loans continue to support. We expect bank credit to grow in the range of 13-14% for FY25.

However, we need to watch for impact of increased risk weight changes in personal loans, credit cards and NBFC on credit growth. Sentiments improved on deposit front & stood at 11.5% (as of 20th September 2024); expect deposit growth to remain in the range of 10-12%.

NIMs pressure seems to remain during Q2 FY25 led by rise in deposit rates by banks. Asset quality should remain stable and we expect credit cost to normalize going forward.

Specialty Chemicals - Gradual recovery expected

We expect improved financial performance from the specialty chemicals sector in Q2 FY25. Weakness in the agrochemical value chain and strong intensity of Chinese dumping is expected to reverse and improve performance. Large demand centres of chemicals such as the U.S. and Europe are exhibiting improvement in demand due to easing inflationary pressures.

The pace of demand recovery will be a key monitorable. However, Chinese dumping will continue to exert pricing pressures. Pricing for most of the chemicals seem to have stabilized.

Also increasing preference for non- Chinese suppliers will also aid demand for Indian players.

Our top pick remains Neogen Chemicals on the back of their strong capex plans in battery chemicals.

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IDBI Capital - Banking, Finance Q2FY25 Earning Preview.pdf

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Also Read: Consumer Durables Q2 Results Preview - Soft Demand, Wires And Cables Continues To Outperform: PL Capital

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