TCS, Infosys, HCL, Wipro Expecting Best Ever Q3 In 10 Years! Share Prices Hit New High
Industry experts believe that the October-December results will be best in a decade as Indian IT companies gear to announce their third quarter earnings of the current fiscal.
On the expectations that IT companies will post good quarterly numbers, shares of TCS surged 4% to a new high of ?3042. Q3 earnings will be announced by TCS later this month.
The country’s largest software exporter, Tata Consultancy Services (TCS) will kick off the December quarter (Q3 FY21) earnings season with results on January 8. Infosys will release Q3 results on January 13.
Q3 Will Continue To Surprise:-
Edelweiss Research said in a report, “We expect Q3FY21 to continue to surprise, driving guidance upgrades by IT companies and estimate revisions by Street alike. In fact, we argue Indian IT companies are poised to turn in the best Q3 in a decade given:
i) Highest-ever order books
ii) Marked revenue acceleration
iii) Margin expansion
iv) Ongoing outlook upgrades”
Edelweiss likes Infosys, HCL Tech, TCS, Tech Mahindra, Mindtree, LTI, LTTS, eClerx, Persistent, and Cyient in IT Space.
The Chief Investment Officer of Axis Securities, Naveen Kulkarni expects IT and consumer companies to post good quarterly numbers.
Meanwhile, the Sensex was firm above 48,000, trading 0.6% higher in late trade.
“Today, the Indian market tested a fresh high of 48,000 at Sensex, amidst a positive development on the vaccination front. Overall, the investor sentiments have been lifted after the emergency approval given by DCGI on two Coronavirus vaccines: Covishield & Covaxin. A strong December closing has laid the platform for a solid 2021. We continue to believe that 2021 will be the year of mid and small caps. 2021 is likely to outperform, similar to 2020 . Our core themes – digital, telecom, pharma, rural, staples and consumer discretionary, continue to remain relevant in 2021. Pharma & IT were the top performing sectors of 2020, while banks were negative,” he said.
Infosys, TCS, HCL To Drive Growth:-
Another brokerage Motilal Oswal remains positive on IT companies. “In Tier I, we expect INFO/TCS/HCLT to drive organic growth (4%/3%/3% QoQ, including cross-currency tailwind) despite a high base and season weakness. Accenture’s recent earnings showed a strong increase in its Outsourcing vertical, indicating demand normalization/recovery. Coupled with strong deal wins across the IT sector, we expect an increase in guidance/positive commentary,” it said.
As per the report, structural demand uptick will drive industry-wide acceleration in revenue growth from 9-10% pre-pandemic to 12-13% in FY22 and 14-16% thereafter through FY27. Based on inputs from experts and commentaries of global companies, Edelweiss estimates industry margins over the next five years to be at least 300 basis points (bps) higher than pre-pandemic led by WFA (work from anywhere) savings and lower non-business travel costs. The gap between EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization) and EBIT will reduce for good owing to lower facility spends, it said.
“High online activity is galvanizing ‘transformation of core’ across industries with cloud and digital becoming mainstream,” it said.
The agency pegged constant currency revenue growth at 1-5% QoQ with a cross-currency benefit of 20-80bps. This would be led by a spurt across industries and geographies with digital and cloud as underlying catalysts. The agency expects beaten-down segments such as retail, transportation and engineering and research & development (ER&D) to bounce back strongly off a low base.