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India Equity Research Reports, IPO and Stock News
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We estimate US$ revenues of IT large caps (except Wipro; with TCS at the high end) will grow 5-
6% qoq, building in 60-100bp cross-currency headwind. FX hedging should result in diverse PAT
performances across companies. Despite rising macro issues, we think the sector is in better
shape now than in 2008-09.
Healthy revenue growth to continue
We expect US$ revenues of IT large caps to grow 5-6% qoq (except for Wipro, which we expect
to report low growth in line with its guidance), with TCS continuing to its peer-leading growth. We
expect volume-led growth with flat constant currency pricing (cross-currency impact at 60-100bp
qoq). We expect revenue growth to remain broad based across verticals, except for telecom,
which is likely to remain muted. Management commentary on the impact of macro headwinds and
recruitment plans will be key factors to watch. Among midcaps, we expect NIIT Tech, Polaris and
Hexaware’s US$ revenue to grow 4.6-8.9% qoq.
Infosys: expect cut in US$ revenue guidance, but upward revision in Rs EPS
We expect Infosys to revise its FY12 US$ revenue growth guidance to 16-18%, vs 18-20%
currently, led by cross-currency headwind (about 100bp impact) and expect caution to be built for
2HFY12 (especially for 4QFY12 as it falls into CY12 IT budgets of clients) given significantly
higher macro headwinds qoq. However, given the rupee’s sharp depreciation in 2QFY12 we
expect Infosys to revise its FY12 EPS guidance to Rs134-136 vs Rs128-130.
Expect varied PAT performance across companies
We expect operating margins to improve qoq 75-133bp for Infosys and TCS, and expect Wipro
and HCL Tech to decline 146-169bp due to wage hikes. Though the rupee’s depreciation will
likely improve EBITDA performances, forex hedging (difficult to forecast due to lack of details) is
likely to result in a material surprise on PAT for most IT companies.
Sector better poised than in the 2008-09 slowdown
We believe the sector is better poised now, than in 2008-09, to face macroeconomic risks (for
details please refer to our report Cautiously optimistic, dated 12 September 2011). Infosys, Wipro
and HCL Tech are our large-cap picks and Polaris is our top mid-cap pick.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
We estimate US$ revenues of IT large caps (except Wipro; with TCS at the high end) will grow 5-
6% qoq, building in 60-100bp cross-currency headwind. FX hedging should result in diverse PAT
performances across companies. Despite rising macro issues, we think the sector is in better
shape now than in 2008-09.
Healthy revenue growth to continue
We expect US$ revenues of IT large caps to grow 5-6% qoq (except for Wipro, which we expect
to report low growth in line with its guidance), with TCS continuing to its peer-leading growth. We
expect volume-led growth with flat constant currency pricing (cross-currency impact at 60-100bp
qoq). We expect revenue growth to remain broad based across verticals, except for telecom,
which is likely to remain muted. Management commentary on the impact of macro headwinds and
recruitment plans will be key factors to watch. Among midcaps, we expect NIIT Tech, Polaris and
Hexaware’s US$ revenue to grow 4.6-8.9% qoq.
Infosys: expect cut in US$ revenue guidance, but upward revision in Rs EPS
We expect Infosys to revise its FY12 US$ revenue growth guidance to 16-18%, vs 18-20%
currently, led by cross-currency headwind (about 100bp impact) and expect caution to be built for
2HFY12 (especially for 4QFY12 as it falls into CY12 IT budgets of clients) given significantly
higher macro headwinds qoq. However, given the rupee’s sharp depreciation in 2QFY12 we
expect Infosys to revise its FY12 EPS guidance to Rs134-136 vs Rs128-130.
Expect varied PAT performance across companies
We expect operating margins to improve qoq 75-133bp for Infosys and TCS, and expect Wipro
and HCL Tech to decline 146-169bp due to wage hikes. Though the rupee’s depreciation will
likely improve EBITDA performances, forex hedging (difficult to forecast due to lack of details) is
likely to result in a material surprise on PAT for most IT companies.
Sector better poised than in the 2008-09 slowdown
We believe the sector is better poised now, than in 2008-09, to face macroeconomic risks (for
details please refer to our report Cautiously optimistic, dated 12 September 2011). Infosys, Wipro
and HCL Tech are our large-cap picks and Polaris is our top mid-cap pick.
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