Ahead of the March quarter results, a couple of brokerages are out with their quarterly results previews. As per the initial reports, the top five IT firms namely TCS, Infosys, HCL Technologies (HCL Tech), Wipro and Tech Mahindra (TechM) are expected to clock double-digit YoY growth in revenues. In terms of profit, Tech Mahindra is expected to log a de-growth in bottom line, Wipro is seen reporting a flattish profit while the three other IT major are expected to log 9-17 per cent rise in bottom lines for the quarter. Investors would keenly await commentary on the BFSI sector, which could turn cautious on tech spending after showing resilience in the last few quarters.
Brokerages such as Motilal Oswal Securities noted that while Indian IT services firms do not have meaningful exposure to the affected US regional banks, fears of a banking crisis is expected to impact near-term IT spending by banks and will be the key monitorable during the management commentary.
Infosys Q4 results preview
In the case of Infosys, ICICI Securities expects revenue growth to be soft at 0.1 per cent QoQ in constant currency terms, given Q4FY23 is a seasonally weak quarter for Infosys. This translates to 16.4 per cent YoY CC growth in FY23E within the company’s guided range of 16-16.5 per cent.
“We estimate 110 bps cross-currency tailwinds in Q4FY23. We model 21.5 per cent EBIT margin, flat QoQ in Q4FY23 and 21.2 per cent in FY23, in line with management commentary of achieving margins near the lower end of guidance of 21-22 per cent. Large deal wins were strong in Q3FY23 at $3.3 billion (20 per cent QoQ), 31 per cent YoY), partly aided by the closure of a bunch of license deals,” it said.
ICICI Securities said the pipeline is replenished, but we expect deal TCV in the range of $2.5-3 billion, a decline on QoQ basis. It expects Infosys to start the year with conservative guidance of 6-8 per cent.
TCS Q4 results preview
Motilal Oswal Securities said TCS remains best positioned to benefit from long-term structural tailwinds in Tech Services and should see a relative pick-up in growth, aided by clients’ focus on cost optimisation and efficiencies. It sees revenue for TCS growing 7.6 per cent YoY (1.8 per cent QoQ) to $7,202 million in dollar terms. In CC terms, revenue growth is likely to be at 0.9 per cent QoQ, implying 90bp of currency tailwind.
In rupee terms, revenue is seen rising 17 per cent YoY (1.7 per cent QoQ) to Rs 59,200 crore. Profit is seen rising 17 per cent YoY to Rs 11,640 crore.
The brokerage expects 30 bps improvement in operating margin, led by stabilising supply and receding attrition. Client budgets, outlook on BFSI and deal wins are key monitorables, it said.
Wipro Q4 results preview
ICICI Securities expects Wipro’s revenue to decline 0.5 per cent QoQ CC in Q4FY23, translating to 11.5 per cent YoY CC growth in FY23E, near the lower end of the guided range of 11.5-12 per cent in FY23, given the weakness in consulting business and worsening macro environment. It estimated 100 bps cross-currency revenue tailwind for Wipro. EBIT margin is expected to be largely flattish (20-30bps), QoQ. The brokerage expects Wipro to guide minus 1 per cent to 1 per cent QoQ CC revenue growth for Q1FY24.
HCL Technologies Q4 results preview
Motilal Oswal said HCL Tech is one of the key beneficiaries of Cloud adoption at scale, given its expertise in IMS. That said, the IT firm’s Q4 results are expected to impacted by software business seasonality.
HCL Tech is expected to report a 20.3 per cent YoY (1.8 per cent QoQ) rise in revenue at Rs 27,180 crore. Profit is seen rising 9.6 per cent YoY to Rs 3,940 crore. Sequential dollar revenue growth is seen at 1.5 per cent while CC revenue growth is seen at 0.5 per cent.
“We expect HCL Tech to report muted growth due to a seasonal drag in HCL Software,” the brokerage said, adding that growth in IT Services to remain strong. Margins are seen decline 150 bps QoQ for HCL Tech, largely due to a seasonal decline in HCL Software.
Tech Mahindra Q4 results preview
TechM is seen as the only exception in the tier-I IT companies that may report a de-growth in sequential CC revenues. The IT major is seen reporting 13.6 per cent YoY (0.2 per cent QoQ) ise in net sales at Rs 13,760 crore. Profit is seen falling 13.9 per cent YoY to Rs 1,330 crore. Revenue in dollar terms may grow at 0.3 per cent, said Motilal Oswal Securities while the same brokerage expects revenue in CC terms to de-grow 0.7 per cent for the quarter.
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