Infosys, TCS to report Q1 earnings this week; here’s what D-Street expects
NEW DELHI: India’s largest IT consultancy firm TCSBSE -0.52 % will report its first quarter numbers on Thursday, while the second largest IT major InfosysBSE 0.23 % is scheduled to report its first quarter results on Friday. Analysts noted that a weakness US dollar against major currencies could gibe over 50 basis points tailwinds to IT firms’ earnings, which may offset wage hikes and rise in visa cost during the quarter.
Concerns may keep loom large over demand in certain verticals and regulatory issues. Investors are expected to keenly follow management commentaries..
Analysts said no more bad news could be perceived as good news.
According to EdelweissBSE -0.45 % Securities, Infosys and TCS are likely to report a dollar revenue sequential growth of 2.8 per cent and 2.3 per cent, respectively. According to the brokerage HCL TechnologiesBSE -0.07 % may lead the pack with 4.2 per cent sequential growth, WiproBSE 0.21 % (down 0.3 per cent QoQ) and and Tech MahindraBSE 0.60 % (down 1 per cent) may come up with poor set of numbers.
The cross currency tailwind for the top 5 IT players is seen at 40-90 basis points, but margins are expected to remain under pressure.
per cent appreciation in rupee is seen hurting revenues.
“However, expectations too have moderated over the last 4 quarters with INR/USD stabilising and most players expected to show cost controls. Q1FY18 results should affect only minimal changes to consensus FY18/FY19 estimates, in our view. Commentaries on medium-term outlook are likely to be sanguine – our channel checks indicate no incremental deterioration in demand – and we expect INFO/HCL to retain their respective constant
Commentaries on medium-term outlook are likely to be sanguine – our channel checks indicate no incremental deterioration in demand – and we expect INFO/HCL to retain their respective constant currency revenue growth guidance. Thus, the absence of negative surprises and YTD underperformance of the IT Index against the broader market could support tactical plays in the sector, even as visibility on when/how of a structural demand recovery continues to be low,” the brokerage said.
During the quarter British pound, Euro and Japanese yen rose 3.2 per cent, 3.2 per cent and 2.3 epr cent on a QoQ basis.
“While we believe that retail will remain soft, we expect growth to be driven by manufacturing, BFSI and telecom verticals. Any turnaround in retail and healthcare verticals, which have been a key revenue growth headwind, would reinforce confidence in revenue growth for the sector,” Edelweiss Securities said, adding that “We expect Indian IT companies to report health care verticals, which have been a key revenue growth headwind, would reinforce confidence in revenue growth for the sector,” Edelweiss Securities said, adding that “We expect Indian IT companies to report healthy growth in digital related services, while legacy services will continue to remain soft during this transitional phase.”
In last one month, expect for Infosys (up 2.88 per cent), all major IT stocks have offered negative 1-2 per cent returns.
But ICICI Securities still prefer largecap IT stocks to smallcaps. “It is challenging for smaller companies to compete on either of the twin vectors of digital and automation and expect them to increasingly be at the receiving end of vendor consolidation scenarios. Our relative preference is to own large caps over mid-caps with Infosys and Tech Mahindra rated top amongst large caps,” the brokerage said.