While projections for TCS suggest deal wins of around $7-10 billion, Nirmal Bang sees Infosys deal wins at $2 billion, reflecting a sequential decline after a record September quarter.
IT major TCS will report its quarterly results today while Infosys, the second largest IT firm, is scheduled to report quarterly results on January 12, Thursday. Analysts expect both the IT companies to report a double digit growth in profit on a 20 per cent-plus growth in sales. Ebit margin are seen expanding sequentially for both the IT firms.
Revenues
Investec sees TCS’ revenues jumping 22.5 per cent YoY to Rs 57,392.40 crore while it sees revenues for Infosys climbing 20.2 per cent Yo to Rs 38,291 crore. TCS is expected to report a 1.9 per cent sequential revenue growth in CC terms compared with a likely 1.2 per cent growth for Infosys, said Nuvama Institutional Equities. Dollar revenue is seen rising 1.6 per cent QoQ compared with 1 per cent for Infosys.
Profit
Elara Securities sees TCS’ profit to rise 12.6 per cent YoY to Rs 11,040 crore. It sees bottom line for Infosys also rising 12.6 per cent YoY to Rs 6,553 crore. Motilal Oswal Securities pegs TCS’ Q3 profit at Rs 11,220 crore, up 14.4 per cent. This brokerage sees profit for Infosys rising 11.2 per cent YoY to Rs 6,500 crore.
Deal wins
While projections for TCS suggest deal wins of around $7-10 billion, Nirmal Bang sees Infosys deal wins at $2 billion, reflecting a sequential decline after a record September quarter (which was highest in seven quarters). This brokerage expects TCS’ deal wins around $8 billion.
Margin
ICICIdirect said the December quarter is expected to be hit by furloughs, with furloughs likely to be higher than the last couple of years. Investec said TCS had earlier indicated the focus is now on improving margins. The benefits of lower sub-contracts and higher billable freshers, and rupee depreciation, should aid margin sequentially, the brokerage. Investec brokerage expects Ebit margin to improve to 24.8 per cent against 24 per cent in September quarter and 25.6 per cent in the year-ago quarter. For Infosys, the same brokerage sees Ebit margin at 21.9 per cent against 21.5 per cent in September quarter and 23.5 per cent in the year-ago quarter.
Price targets
Ahead of its earnings, Infosys has an average price target of Rs 1,716.43, based on estimates of 40 analysts, which suggests a potential 19 per cent upside ahead. This is as per data publicly available with Trendlyne. TCS on the other hand, has an average price target of Rs 3,717.80, which suggests a 16 per cent potential upside.
Guidance/ what to watch
For TCS, said Emkay Global, the key things to watch would include 2023 IT budget, demand trends in key
verticals like BFSI, retail, manufacturing, and communications, deal intake in Q3 and pricing environment considering high inflation. Margin outlook, regional markets outlook and the management commentary on any impact on tech spendings from higher energy prices and macro uncertainties/recession will also be keenly watched, Emkay said.
For Infosys, Emkay expects Infosys to retain its FY23 guidance of 15-16 per cent CC YoY revenue growth and 21-22 per cent EBIT margin. It said investors would watch out for large deals intake; any deferral/cancellation of projects due to macro uncertainties and high inflation and update on client conversations – impact from high energy prices, inflation, and potential economic slowdown/recession.
They woudl also watch out for management commentary on: demand environment in BFSI, manufacturing, retail, and communications, Emkay said.
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