What to look out for in the Q3 results for Infosys, TCS, Wipro, Cyient, Mphasis, Persistent, and Coforge shares?

  • Jan. 2, 2024, 5:18 p.m.

IT companies are ready to begin the December quarter earnings season. On January 11, the two biggest software exporters, Tata Consultancy Services Ltd. and Infosys Ltd., will release their results. The cautious management statement is unlikely to alter, based on the opinions of analysts. Due to increased furloughs, December is already a historically dismal month for IT majors. Analysts predict that delayed salary increases would hurt profits.

"Mega agreements (above $1 billion TCV) have not been announced for this quarter. We'll look into comments on that front. It's also possible that clients didn't want any such big transactions to be made public. The economic climate in continental Europe has recently gotten worse, therefore Nirmal Bang Institutional Equities remarked that they would wait to see if this affects demand here.

Investors, according to Nirmal Bang, would like to know if Infosys reports revenue at the higher or lower end of its guidance if HCL Technologies Ltd. will meet its tier-1 leading guidance in revenue, and if the higher-than-industry revenue conversion issue observed at Wipro has been resolved.

While everyone would be watching to see how well LTIMindtree Ltd.'s cross- and up-selling tactics are working, Tech Mahindra Ltd. would be closely monitoring its CME vertical performance and prognosis. Additionally, investors would like to know if the exit margin for FY24 has changed.

Investors in tier II players would like to know how Mphasis Ltd's non-mortgage BFS area is performing sequentially, how Persistent Systems' Hi-tech and BFSI verticals are doing, and whether Coforge Ltd's forecast of 13.–16% CC revenue growth and 18.3% adjusted EBITDA margin for FY24 have changed.

Because 3Q furloughs have exceeded expectations from the start of FY24, we believe that the selective Tier-2 companies (Coforge, Cyient) would lower their revenue projection. Nevertheless, by putting strict cost-cutting measures in place, we expect the companies to retain and achieve margins within the recommended band," stated Motilal Oswal Securities.

This brokerage anticipates a significant drop in CC revenues for Infosys (down 1.7% QoQ) and Wipro (down 2.7% QoQ). With a two percent quarterly growth in CC revenue in its service sector, HCL Tech should surpass competitors. It is seen that LTIMindtree, TCS, and TechM have reported revenue growth/degrowth of 1.2%, -0.4%, and -1.1% QoQ, respectively.

"We anticipate Persistent Systems to surpass its peers among Tier-II companies, achieving a 3 percent QoQ growth."

CC revenue increase powered by robust momentum in the healthcare and hi-tech sectors. Zensar Technologies Ltd is anticipated to witness a fall of 4.4% QoQ in CC, while L&T Technology Services Ltd/Coforge Ltd should see a mild increase of 1.3%/1.0% QoQ in CC, followed by Mphasis/CYL-DET at 1.0%/0.3% QoQ in CC," the statement stated.

Emkay Global stated that it anticipates mid-caps to expand sequentially by 1.0% to 4.6%. While HCL Tech should stick to its guidance of 5–6% CC YoY, Infosys is expected to reduce its FY24 revenue guidance to 1-2 percent from 1-2.5 percent. It anticipates Wipro to provide sales growth guidance for Q4FY24 of minus 1% to 1%.

The firm stated that even while earnings forecasts for IT stocks have decreased over the same period (with the exception of Birlasoft, Firstsource Solutions, and EClerx Services), multiple rerating is responsible for the majority of the stocks' gains in FY24.

"We increase the target multiples in order to account for the reduced economic uncertainty and the predicted acceleration of the revenue growth trajectory. As a result, our target price increases by up to 36% and rolls over to December 24E. We keep our ratings on other covering stocks the same while upgrading HCL Tech from Reduce to BUY. Among Tier-1 firms, Infosys, HCL Tech, TechM, Wipro, TCS, and LTIMindtree are in our pecking order," the statement stated.

 

Author : Rajdhani Delhi Representative

Rajdhani delhi representative

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