Indian Information Technology companies have been beneficiaries of strong deal wins and better margins amid cost cuts. As the spending on technology continues to rise, IT companies are likely to witness strong growth in Q3FY21.

The Ebit margins are expected to decline on a sequential basis for most players with the resumption of annual wage revisions and promotions which were suspended so far in FY21.

The third quarter of fiscal 2021 has seen at-least five $100 million+ total contract value (TCV) deal wins for IT companies, including an estimated USD 3.2 billion Daimler deal for Infosys.

Company Net Sales ( in Rs. Cr.) Var (%) Profit After Tax (in Rs. Cr.) Var (%)
Dec-20 Sep-20 Dec-19 YoY QoQ Dec-20 Sep-20 Dec-19 YoY QoQ
TCS 41186 40135 39854 3.34 2.62 8594 7475 8118 5.86 14.97
Infosys 25182 24570 23092 9.05 2.49 5049 4845 4457 13.28 4.21
HCL Technologies 19068 18594 18135 5.14 2.55 3129 3143 2944 6.28 -0.45
Wipro 15538 15115 15471 0.44 2.80 2549 2466 2456 3.79 3.38
Tech Mahindra 9539 9372 9655 -1.20 1.78 1150 1065 1146 0.36 8.02
L & T Infotech 3124 2998 2811 11.13 4.19 517 456 377 37.03 13.48
Mphasis 2487 2435 2277 9.24 2.12 311 299 294 5.93 3.93
Mindtree 1997 1926 1965 1.61 3.69 277 254 197 40.61 9.18
L&T Technology 1369 1314 1423 -3.81 4.18 185 166 204 -9.36 11.78
Persistent Sys 1047 1008 923 13.47 3.89 118 102 88 34.20 15.70
Cyient 1018 1003 1106 -7.95 1.47 78 84 108 -27.98 -7.03

Source – Phillip Capital Research, Bloomberg Quint, EWL Research

TCS – EBIT margins to decline by -90bps qoq  on wage hikes however partly offset by positive onsite-offshore mix and strong growth

Watch out for IT Industry demand outlook for 2021, Deal TCVs and pipeline, Pricing scenario, and outlook on BFSI segment

Infosys – Growth to be led by ramp up of Vanguard deal and acquisitions . Infosys after its second-quarter results had raised revenue growth guidance to 2-3% for the entire fiscal compared with 0-2% forecast earlier. It is expected  to raise revenue growth guidance to 2.5-3.5% in constant currency and retain EBIT margin guidance of 23-24%.

Watch out for: FY21 guidance update, Deal TCVs (Record deal wins expected again) and pipeline, Pricing scenario, attrition and outlook

HCL Tech – HCL Tech earlier maintained revenue growth guidance for the next two quarters of FY21 at 1.5-2.5 and guided its EBIT margin to be between 20% and 21% against 19.5-20.5% forecast Earlier. Expected  to retain revenue growth and EBIT margin guidance

Wipro – Margins are expected to remain flat qoq with one month impact of wage hikes  partly offset by strong growth. Wipro expected to guide for 0% to +2% qoq CC growth for Q4

Watch out for: Deal wins and pipeline commentary, updates on new  strategy, outlook on healthcare and energy verticals

L&T Infotech – Growth to be boosted by higher pass through revenues (seasonality in Q3). argins expected to largely remain flat on a qoq basis

Watch out for –  Commentary on FY21 outlook, large deal wins pipeline and conversions and deal win ramp ups.

L&T Technology – Expect strong USD revenue growth of +4.1% qoq; expect growth to be broad based across verticals Margins to expand by +70bps qoq led by revenue growth, cost optimization measures; Margins also helped by absence of wage hikes.

Persistent System  – Expect Strong Revneue growth of 13%. Margins are expected to largely remain flat qoq despite wage hikes on strong revenue growth and efficiency measures.

Watch out for: Revenue growth and margins outlook, deal win & pipeline commentary and IP business outlook

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Elite Wealth Ltd. does/does not do business with companies covered in its research reports. Investors should be aware that the Elite Wealth Advisors Limited may/may not have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as read more


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