Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IT Services
Strong global cues
Accenture and Oracle reported strong results overnight. We believe this implies
that the demand environment for Indian IT services continues to improve. We
reiterate our positive view on the sector with Infosys as our top pick, besides our
Buy on TCS and HCL Tech.
Accenture's strong 2QFY11 results augur well for Indian IT services
! Accenture reported strong revenue growth of 18% YoY in 2QFY11 (in local currency) with
20% growth in consulting and 15% growth in outsourcing.
! Besides strong growth in 2QFY11/1HFY11, Accenture’s order book has grown 7% YoY to
US$6.98bn with consulting order book growing 12.1% YoY. This was Accenture’s highest
order booking in the last 10 quarters. Management’s commentary on outsourcing booking
also indicates that existing clients are driving more outsourcing with increase in scope,
expansion to new geographies as well as new work. These trends are clearly positive for
Indian IT services vendors whose wallet share is increasing in new deal outsourcing/managed
services awards.
! Besides strong performance and bookings, Accenture has upgraded its FY11 revenue growth
guidance to 11-14% (in local currency) versus earlier guidance of 8-11%. Despite FY11 order
book guidance remaining unchanged at US$25bn-28bn, management is more confident of at
least reporting new bookings of US$26bn in FY11. 1HFY11 bookings were US$13.29bn. With
strong revenue growth guidance of Cognizant (26% in CY11) and Accenture for FY11, we
reiterate our top pick Infosys will also take a more confident stance on FY12 guidance (due in
April 2011).
! Continued strong growth in consulting in the last two quarters (16% growth in 1QFY11 and
20% in 2QFY11) at Accenture clearly indicates a pickup in discretionary spend. Even
management comments indicate more uptick in transformational projects led by trends
including globalisation, regulations, innovation, operational excellence, digitisation and new
technology wave. This augurs well for our top pick Infosys with higher revenues from
discretionary services versus peers.
! Vertically the yoy growth in constant currency was in double digits across verticals with
resources and financial services leading which grew by 25% and 20% respectively in
2QFY11.
! Management’s comments also indicate strong expansion in GDN (global delivery network)
with +122000 employees out of +215000 total employees at the end of 2QFY11. Furthermore,
management indicated that expansion in offshore location is increasing due to higher demand
for cost takeout projects. Even the attrition (excluding involuntary) was down to 14% from
15% QoQ. These trends also indicate that the demand for outsourcing as well as offshoring is
increasing which also augurs well for Indian IT.
! On pricing pressure in outsourcing/SI (system integration) deals, management believes that
despite pricing remaining competitive, pressure is stabilising with signs of pricing
improvements visible of late. These comments are in line with comments of Indian IT vendors
where they are more affirmative regarding upward bias on the pricing.
Oracle's results signals discretionary spending is coming back strongly
! Oracle reported new licence revenues of US$2.2bn for the quarter ending Feb-11, up 28.9%
yoy.
! This is the fastest yoy growth seen since the pre-downturn days of Nov-07, suggesting that
demand for its software licences is showing healthy improvement.
! We believe this is positive for Indian IT sector in terms of improvement in discretionary
demand in general and particularly for downstream package implementation business, that
has a 2-4 quarter lag to licence sales.
! Among the Top4 Indian IT names, Infosys, HCL Tech and TCS are best poised to ride the
comeback in discretionary spending. We believe Infosys and TCS in particular are strong in
the Oracle implementation space.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
IT Services
Strong global cues
Accenture and Oracle reported strong results overnight. We believe this implies
that the demand environment for Indian IT services continues to improve. We
reiterate our positive view on the sector with Infosys as our top pick, besides our
Buy on TCS and HCL Tech.
Accenture's strong 2QFY11 results augur well for Indian IT services
! Accenture reported strong revenue growth of 18% YoY in 2QFY11 (in local currency) with
20% growth in consulting and 15% growth in outsourcing.
! Besides strong growth in 2QFY11/1HFY11, Accenture’s order book has grown 7% YoY to
US$6.98bn with consulting order book growing 12.1% YoY. This was Accenture’s highest
order booking in the last 10 quarters. Management’s commentary on outsourcing booking
also indicates that existing clients are driving more outsourcing with increase in scope,
expansion to new geographies as well as new work. These trends are clearly positive for
Indian IT services vendors whose wallet share is increasing in new deal outsourcing/managed
services awards.
! Besides strong performance and bookings, Accenture has upgraded its FY11 revenue growth
guidance to 11-14% (in local currency) versus earlier guidance of 8-11%. Despite FY11 order
book guidance remaining unchanged at US$25bn-28bn, management is more confident of at
least reporting new bookings of US$26bn in FY11. 1HFY11 bookings were US$13.29bn. With
strong revenue growth guidance of Cognizant (26% in CY11) and Accenture for FY11, we
reiterate our top pick Infosys will also take a more confident stance on FY12 guidance (due in
April 2011).
! Continued strong growth in consulting in the last two quarters (16% growth in 1QFY11 and
20% in 2QFY11) at Accenture clearly indicates a pickup in discretionary spend. Even
management comments indicate more uptick in transformational projects led by trends
including globalisation, regulations, innovation, operational excellence, digitisation and new
technology wave. This augurs well for our top pick Infosys with higher revenues from
discretionary services versus peers.
! Vertically the yoy growth in constant currency was in double digits across verticals with
resources and financial services leading which grew by 25% and 20% respectively in
2QFY11.
! Management’s comments also indicate strong expansion in GDN (global delivery network)
with +122000 employees out of +215000 total employees at the end of 2QFY11. Furthermore,
management indicated that expansion in offshore location is increasing due to higher demand
for cost takeout projects. Even the attrition (excluding involuntary) was down to 14% from
15% QoQ. These trends also indicate that the demand for outsourcing as well as offshoring is
increasing which also augurs well for Indian IT.
! On pricing pressure in outsourcing/SI (system integration) deals, management believes that
despite pricing remaining competitive, pressure is stabilising with signs of pricing
improvements visible of late. These comments are in line with comments of Indian IT vendors
where they are more affirmative regarding upward bias on the pricing.
Oracle's results signals discretionary spending is coming back strongly
! Oracle reported new licence revenues of US$2.2bn for the quarter ending Feb-11, up 28.9%
yoy.
! This is the fastest yoy growth seen since the pre-downturn days of Nov-07, suggesting that
demand for its software licences is showing healthy improvement.
! We believe this is positive for Indian IT sector in terms of improvement in discretionary
demand in general and particularly for downstream package implementation business, that
has a 2-4 quarter lag to licence sales.
! Among the Top4 Indian IT names, Infosys, HCL Tech and TCS are best poised to ride the
comeback in discretionary spending. We believe Infosys and TCS in particular are strong in
the Oracle implementation space.
No comments:
Post a Comment