Earnings contraction, poor returns weigh on stock valuations of PSUs

Earnings contraction, coupled with poor return on net worth (RoNW), weighs on the stock valuation of these PSUs

Most of the top public sector firms are facing challenges, both on the top line and bottom line fronts.

Six of the top 10 PSUs in terms of revenues reported a decline in earnings on a year-on-year (YoY) basis during the trailing 12 months ended September 2020; a similar number reported an earnings contraction during the period.

The combined revenues of these top 10 PSUs, including industry leaders like State Bank of India, Indian Oil, ONGC, NTPC, and Coal India, were down 11.3 per cent YoY during the year ended September 2020; their combined net sales were down 26.7 per cent YoY