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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