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UBS Investment Research
Indian IT Services
R ead through from Accenture Q4 results
Record bookings, strong FY12 guidance—no macro impact seen
Accenture (ACN) posted record bookings of US$8.4bn in Q4 FY11, with
consulting bookings of US$4.2bn, well above the UBS estimate of US$3.7bn.
ACN reiterated its FY12 revenue guidance of 7-10% constant currency growth,
which our analyst Arvind Ramnani thinks will be achievable given strong bookings
over the past several quarters. ACN’s management acknowledged increased macro
risks, but continued to see strong demand.
Strong financial services growth is positive near-term read through
ACN recorded 13% YoY growth in financial services in constant currency terms, a
positive read through for Indian vendors over the near term. We expect revenue
momentum to remain robust in Q2 FY12 for most Indian vendors.
Accenture is late cycle, Indian vendors are more sensitive to budget turns
Indian vendors have historically been more sensitive to changes in demand than
IBM and ACN due to their higher exposure to discretionary spending and shorter
project durations. In the recent recession, Indian vendors saw revenue slow ahead
of IBM and ACN, and recovered three to four quarters earlier than the larger global
vendors. We therefore hesitate to extrapolate the confidence exhibited by ACN,
which has seen strong bookings/upgrades only in the last few quarters, to the
demand outlook for Indian vendors.
Remain cautious, maintain recommendations
We expect a demand slowdown for Indian IT services by late 2011/early 2012. We
reiterate our cautious view on the sector despite the current rally. We maintain our
Neutral ratings on Tata Consultancy Services (TCS) and Infosys and our Sell
ratings on all other stocks under our coverage.
Statement of Risk
We believe a sharp decline in IT spending or currency appreciation could result
in downward revisions to our earnings estimates.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Indian IT Services
R ead through from Accenture Q4 results
Record bookings, strong FY12 guidance—no macro impact seen
Accenture (ACN) posted record bookings of US$8.4bn in Q4 FY11, with
consulting bookings of US$4.2bn, well above the UBS estimate of US$3.7bn.
ACN reiterated its FY12 revenue guidance of 7-10% constant currency growth,
which our analyst Arvind Ramnani thinks will be achievable given strong bookings
over the past several quarters. ACN’s management acknowledged increased macro
risks, but continued to see strong demand.
Strong financial services growth is positive near-term read through
ACN recorded 13% YoY growth in financial services in constant currency terms, a
positive read through for Indian vendors over the near term. We expect revenue
momentum to remain robust in Q2 FY12 for most Indian vendors.
Accenture is late cycle, Indian vendors are more sensitive to budget turns
Indian vendors have historically been more sensitive to changes in demand than
IBM and ACN due to their higher exposure to discretionary spending and shorter
project durations. In the recent recession, Indian vendors saw revenue slow ahead
of IBM and ACN, and recovered three to four quarters earlier than the larger global
vendors. We therefore hesitate to extrapolate the confidence exhibited by ACN,
which has seen strong bookings/upgrades only in the last few quarters, to the
demand outlook for Indian vendors.
Remain cautious, maintain recommendations
We expect a demand slowdown for Indian IT services by late 2011/early 2012. We
reiterate our cautious view on the sector despite the current rally. We maintain our
Neutral ratings on Tata Consultancy Services (TCS) and Infosys and our Sell
ratings on all other stocks under our coverage.
Statement of Risk
We believe a sharp decline in IT spending or currency appreciation could result
in downward revisions to our earnings estimates.
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