Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Technology
India
Cognizant reports strong 2Q; reiterate our positive stance on industry demand.
Cognizant’s strong 2Q earnings report (+8.3% qoq US$ rev growth), robust (though
still conservative) guidance for the next two quarters, and confident undertone in
management commentary serve as additional proof-points to our thesis on strong
demand environment for the Indian IT services industry. Weakness at Infosys/Wipro is
company-specific and not reflective of the demand environment, notwithstanding weak
macro indicators. We remain positive on the sector. BUY TCS/Infosy
The macro/micro dichotomy continues
Cognizant’s strong, industry-leading, consensus-beating 8.3% qoq US$ revenue growth begs the
oft-asked (in the past 2-3 years) question again – why the dichotomy between weak macro
indicators and strong micro ones coming from offshore IT services players like TCS, Cognizant, and
select midcaps? There is no clear answer to this one, but CTSH management’s earnings
commentary provided some useful indicators; we paraphrase below
` ‘there is significant pressure on clients to reduce costs and drive innovation/ transformation at
the same time – global delivery model of the offshore players is critical to achieve this dual
objective, creating substantial opportunities for Indian IT services players’
` ‘macro uncertainty has increased but clients understand that this is the new normal and are not
holding back decision making’
` ‘at an aggregate level, there is very strong demand for offshore IT services in the market, even
as CTSH’s market share gains are driving industry-leading revenue growth’
` ‘clients (especially in the BFSI vertical) are looking at increasingly variablizing their cost structures;
this is driving growth for the vendors even as they are cutting in-house jobs’
CTSH’s earnings report provides several strong demand indicators for the industry
` 8.3% sequential US$ revenue growth to US$1,485 mn - handsome beat of consensus
expectations and the company’s own guidance for the quarter
` Robust, though still conservative in our view, rev growth guidance of 5.7% qoq for the Sep
2011 quarter; this builds in around 0.4% kicker from a recent acquisition
` Upward revision in CY2011E revenue growth guidance – to 32% from 29% at end-1QCY11;
the recent acquisition contributes less than 0.5% point to the revision
` Broad-based growth across verticals, geographies, and service lines
` Strong net employee additions at 7,000+, taking CTSH’s end-Jun 2011 headcount to 118,300
` Management’s commentary on strong pipeline, and no usual summer lull in decision making
` Positive commentary on pricing momentum
` Record number of promotions ever and increasing investments in capability/ capacity building
CTSH 2QCY12 results – other key highlights
` Revenue growth was broad-based. Among verticals, healthcare grew the fastest (+10%
qoq), even as BFSI (+7.5% qoq) and manufacturing/retail/logistics (+7.3% qoq) also
showed robust growth. Geographically, North America led with 8% qoq growth, while
Europe reported 5.3% constant currency qoq revenue growth.
` The company indicated that it has been able to back-fill the loss of M&A-related revenues
from its European BFSI customers.
` Application Development (+10.6% qoq) grew faster than Application Management for
the 6
th
consecutive quarter, indicating robust momentum in discretionary spend areas.
` Pricing was up marginally on a qoq basis; the company indicated positive pricing
momentum.
` Net headcount addition was a little over 7,000 for the quarter. Attrition was stable at
around 15.2%, quarterly annualized.
` The company ended the quarter with US$2.3 bn of cash and equivalents. Hedges
outstanding were US$2.8 bn.
` Utilization inched up marginally, both onsite and offshore.
` Visa situation is tight but the company sees no operational disruption.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Technology
India
Cognizant reports strong 2Q; reiterate our positive stance on industry demand.
Cognizant’s strong 2Q earnings report (+8.3% qoq US$ rev growth), robust (though
still conservative) guidance for the next two quarters, and confident undertone in
management commentary serve as additional proof-points to our thesis on strong
demand environment for the Indian IT services industry. Weakness at Infosys/Wipro is
company-specific and not reflective of the demand environment, notwithstanding weak
macro indicators. We remain positive on the sector. BUY TCS/Infosy
The macro/micro dichotomy continues
Cognizant’s strong, industry-leading, consensus-beating 8.3% qoq US$ revenue growth begs the
oft-asked (in the past 2-3 years) question again – why the dichotomy between weak macro
indicators and strong micro ones coming from offshore IT services players like TCS, Cognizant, and
select midcaps? There is no clear answer to this one, but CTSH management’s earnings
commentary provided some useful indicators; we paraphrase below
` ‘there is significant pressure on clients to reduce costs and drive innovation/ transformation at
the same time – global delivery model of the offshore players is critical to achieve this dual
objective, creating substantial opportunities for Indian IT services players’
` ‘macro uncertainty has increased but clients understand that this is the new normal and are not
holding back decision making’
` ‘at an aggregate level, there is very strong demand for offshore IT services in the market, even
as CTSH’s market share gains are driving industry-leading revenue growth’
` ‘clients (especially in the BFSI vertical) are looking at increasingly variablizing their cost structures;
this is driving growth for the vendors even as they are cutting in-house jobs’
CTSH’s earnings report provides several strong demand indicators for the industry
` 8.3% sequential US$ revenue growth to US$1,485 mn - handsome beat of consensus
expectations and the company’s own guidance for the quarter
` Robust, though still conservative in our view, rev growth guidance of 5.7% qoq for the Sep
2011 quarter; this builds in around 0.4% kicker from a recent acquisition
` Upward revision in CY2011E revenue growth guidance – to 32% from 29% at end-1QCY11;
the recent acquisition contributes less than 0.5% point to the revision
` Broad-based growth across verticals, geographies, and service lines
` Strong net employee additions at 7,000+, taking CTSH’s end-Jun 2011 headcount to 118,300
` Management’s commentary on strong pipeline, and no usual summer lull in decision making
` Positive commentary on pricing momentum
` Record number of promotions ever and increasing investments in capability/ capacity building
CTSH 2QCY12 results – other key highlights
` Revenue growth was broad-based. Among verticals, healthcare grew the fastest (+10%
qoq), even as BFSI (+7.5% qoq) and manufacturing/retail/logistics (+7.3% qoq) also
showed robust growth. Geographically, North America led with 8% qoq growth, while
Europe reported 5.3% constant currency qoq revenue growth.
` The company indicated that it has been able to back-fill the loss of M&A-related revenues
from its European BFSI customers.
` Application Development (+10.6% qoq) grew faster than Application Management for
the 6
th
consecutive quarter, indicating robust momentum in discretionary spend areas.
` Pricing was up marginally on a qoq basis; the company indicated positive pricing
momentum.
` Net headcount addition was a little over 7,000 for the quarter. Attrition was stable at
around 15.2%, quarterly annualized.
` The company ended the quarter with US$2.3 bn of cash and equivalents. Hedges
outstanding were US$2.8 bn.
` Utilization inched up marginally, both onsite and offshore.
` Visa situation is tight but the company sees no operational disruption.
No comments:
Post a Comment