Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cognizant's higher than consensus revenue growth and CY11 guidance upgrade underscores the
healthy demand outlook for Indian IT. Commentary was positive on i) improved client decision
making on yoy basis and ii) improving growth from Europe. Any significant macro slowdown in
US/Europe is a key risk.
Cognizant's comments relating to demand outlook are positive for the sector
Despite increased macro uncertainty Cognizant witnessed improved decision making
(especially in discretionary spending) as it believes that clients are more prepared for
prolonged economic uncertainty this time (in line with comments from its peers including TCS)
as well as increasing demand for mobility, cloud and analytics across various verticals.
Cognizant witnesses normal sales cycle with demand pipeline continues to remain healthy.
This is in line with comments of other large Indian peers. Even in BFSI, Cognizant reported
7.5% qoq growth in revenues during 2Q11. Cognizant commented that it witnesses higher
demand relating cost take out projects within BFSI due to increasing trend of converting fixed
cost to variable cost and this is also leading to increasing trend of variable pricing.
Cognizant reported constant currency growth of 5.3% qoq in Europe (reported growth of 8.2%
qoq) with balanced growth from UK and Continental Europe during 2Q11. Cognizant
witnessed growth from new projects replacing the tapering demand from M&A related work
within Europe. In 2HCY11, Cognizant expects Europe to grow in line with company average
on the back of increased demand for efficiencies and new technologies.
Cognizant continues to witness higher pricing even in 2Q11. It has started the negotiations
with clients relating to pricing for CY12.
Significantly higher growth of 10.6% qoq in development revenues versus 6% growth in
maintenance revenues was the key highlight of the 2Q11 results and indicates demand for
discretionary spend is increasing for the industry. Besides higher demand for discretionary
spend, Cognizant witnesses higher demand for IMS/BPO services. Cognizant commented
that it has started witnessing higher wallet share versus peers.
Cognizant mentioned that it continues to get the required work visas for the onsite business
and visa issues are not disrupting the business.
2Q11 results highlights
Cognizant reported 8.3% qoq growth in revenues (this compares to TCS's 6.9% growth in
International revenues and 4.3%/5.3% growth in consolidated revenues of Infosys/HCL Tech)
versus consensus estimates of 6.5% growth and its guidance of at least 5.7% growth. Growth
was broad based with all verticals reporting more than 7% qoq growth (higher growth of
10.7% qoq in Healthcare). Even geographically, Cognizant reported around 8% qoq growth in
each of the major markets including US and Europe.
For CY11, Cognizant upgraded its revenue growth guidance to at least 32% (31.5% excluding
revenues from recently acquired company CoreLogic) versus earlier guidance of at least 29%
growth (original guidance of at least 26% growth). While 2Q11 revenues outperformed
guidance by US$35mn, Cognizant upgraded its CY11 revenue guidance (organic) by
US$114mn.
For 3Q11, Cognizant given qoq revenue growth guidance of at least 5.7% (organic growth
guidance of at least 5.4% qoq versus Infosys's guidance of 3.5-5% growth). Implied qoq
revenue growth guidance for 4Q11 is 4% qoq (3.4% qoq on organic basis).
Cognizant added over 7,100 employees on net basis versus 7,200 employees added in
1Q11. Cognizant is not witnessing any increase in attrition rates which were 15.2%
(consolidated including trainees) in 2Q11.
Cognizant's 2Q11 reported revenues worth $1485mn is now higher than Wipro's reported IT
services' revenues of $1408mn (while guidance given by the two companies for 3Q11 reflects
increasing gap - Cognizant guided revenues of at least $1570mn while Wipro's guidance of
$1464mn at higher end).
Read through Cognizant's 2Q11 results positive for the Indian IT sector
Overall we believe that Cognizant's 2Q11 results and conference call comments underscores
the healthy demand outlook for Indian IT. We have a buy rating on Infosys, TCS and HCL
Tech. Key risks including i) any significant macro slowdown in US/Europe and ii) any sharp
rupee appreciation remains going forward.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cognizant's higher than consensus revenue growth and CY11 guidance upgrade underscores the
healthy demand outlook for Indian IT. Commentary was positive on i) improved client decision
making on yoy basis and ii) improving growth from Europe. Any significant macro slowdown in
US/Europe is a key risk.
Cognizant's comments relating to demand outlook are positive for the sector
Despite increased macro uncertainty Cognizant witnessed improved decision making
(especially in discretionary spending) as it believes that clients are more prepared for
prolonged economic uncertainty this time (in line with comments from its peers including TCS)
as well as increasing demand for mobility, cloud and analytics across various verticals.
Cognizant witnesses normal sales cycle with demand pipeline continues to remain healthy.
This is in line with comments of other large Indian peers. Even in BFSI, Cognizant reported
7.5% qoq growth in revenues during 2Q11. Cognizant commented that it witnesses higher
demand relating cost take out projects within BFSI due to increasing trend of converting fixed
cost to variable cost and this is also leading to increasing trend of variable pricing.
Cognizant reported constant currency growth of 5.3% qoq in Europe (reported growth of 8.2%
qoq) with balanced growth from UK and Continental Europe during 2Q11. Cognizant
witnessed growth from new projects replacing the tapering demand from M&A related work
within Europe. In 2HCY11, Cognizant expects Europe to grow in line with company average
on the back of increased demand for efficiencies and new technologies.
Cognizant continues to witness higher pricing even in 2Q11. It has started the negotiations
with clients relating to pricing for CY12.
Significantly higher growth of 10.6% qoq in development revenues versus 6% growth in
maintenance revenues was the key highlight of the 2Q11 results and indicates demand for
discretionary spend is increasing for the industry. Besides higher demand for discretionary
spend, Cognizant witnesses higher demand for IMS/BPO services. Cognizant commented
that it has started witnessing higher wallet share versus peers.
Cognizant mentioned that it continues to get the required work visas for the onsite business
and visa issues are not disrupting the business.
2Q11 results highlights
Cognizant reported 8.3% qoq growth in revenues (this compares to TCS's 6.9% growth in
International revenues and 4.3%/5.3% growth in consolidated revenues of Infosys/HCL Tech)
versus consensus estimates of 6.5% growth and its guidance of at least 5.7% growth. Growth
was broad based with all verticals reporting more than 7% qoq growth (higher growth of
10.7% qoq in Healthcare). Even geographically, Cognizant reported around 8% qoq growth in
each of the major markets including US and Europe.
For CY11, Cognizant upgraded its revenue growth guidance to at least 32% (31.5% excluding
revenues from recently acquired company CoreLogic) versus earlier guidance of at least 29%
growth (original guidance of at least 26% growth). While 2Q11 revenues outperformed
guidance by US$35mn, Cognizant upgraded its CY11 revenue guidance (organic) by
US$114mn.
For 3Q11, Cognizant given qoq revenue growth guidance of at least 5.7% (organic growth
guidance of at least 5.4% qoq versus Infosys's guidance of 3.5-5% growth). Implied qoq
revenue growth guidance for 4Q11 is 4% qoq (3.4% qoq on organic basis).
Cognizant added over 7,100 employees on net basis versus 7,200 employees added in
1Q11. Cognizant is not witnessing any increase in attrition rates which were 15.2%
(consolidated including trainees) in 2Q11.
Cognizant's 2Q11 reported revenues worth $1485mn is now higher than Wipro's reported IT
services' revenues of $1408mn (while guidance given by the two companies for 3Q11 reflects
increasing gap - Cognizant guided revenues of at least $1570mn while Wipro's guidance of
$1464mn at higher end).
Read through Cognizant's 2Q11 results positive for the Indian IT sector
Overall we believe that Cognizant's 2Q11 results and conference call comments underscores
the healthy demand outlook for Indian IT. We have a buy rating on Infosys, TCS and HCL
Tech. Key risks including i) any significant macro slowdown in US/Europe and ii) any sharp
rupee appreciation remains going forward.
No comments:
Post a Comment