India’s largest IT company Tata Consultancy Services (TCS) will kick off the earnings season next week with its fourth quarter FY21 results expected on Monday, April 12, 2021. TCS share price has jumped 11 % in January-March 2021, and 16% cent so far this year (YTD). During the quarter ended March 31, 2021, the Nifty IT index jumped 6.61%, compared to a 5% increase in the Nifty 50 index. Analysts believe that growth in the fourth quarter of last fiscal year continued. to be driven by a favorable demand environment and major contracts won.
IT companies have posted higher-than-expected corporate profits over the past two quarters. Analysts expect companies to post strong earnings again this quarter, supported by significant increases in transactions and continued spending on digital programs.
Increased income: “With the exception of Wipro and Mindtree, most companies are expected to end FY21 with stable to low single-digit annual growth despite a sharp decline in Q1 FY21,” said Ruchi Burde and Seema Nayak, analysts at BOB Capital Markets. IT companies adopted strong cash flow management at the onset of the COVID-19 pandemic, given the uncertainty over the demand environment and low visibility of revenue growth in the early months of the month. pandemic.
Profit: Brokerage and research firm Prabhudas Lilladher has assigned a “buy” rating to all shares of IT companies under their coverage, including Infosys, TCS, Wipro, HCL Technologies and Mindtree. TCS announced a regular salary increase cycle for FY22 in the first quarter of FY22 in addition to the FY21 progression cycle recently conducted in the third quarter of the previous fiscal year. Reliance Securities analysts expect companies to report sequential decline in profitability due to annual cycle of wage increases; marginal increase in investment in sales and capacity; and currency headwinds.
A big deal wins: National brokerage Kotak Institutional Equities Research noted that deal signatures in the last quarter of FY21 will be strong and the pipeline will remain healthy. “We expect Infosys and HCL Technologies to lead 12-14% growth and 10-12% revenue growth for FY2022E,” he added. TCS is expected to grow sequentially with revenue from two large transactions with a total contract value (TCV) of US $ 1.3 billion to US $ 2.6 billion (Postbank Systems and Prudential Financial) in several transactions of $ 50 million to $ 100 million in the previous quarter, and strong demand in the cloud and customer experience areas.
Orientations FY22: Most analysts expect robust comments, record hits and a bullish outlook. “We believe that the upward revision of forecasts by IT companies three quarters ago would be followed by consensus forecast upgrades for the coming quarters,” analysts at Edelweiss Research said. It should be noted that global demand for IT services remains robust as indicated by Accenture’s improved forecast for FY21 with 2.5% growth, strong growth in outsourcing and solid growth. YoY double-digit cloud in Q1 and Q2 21. “We expect healthy double-digit annual growth guidance for FY22 from Infosys, HCL Technologies, L&T Infotech, Wipro and Coforge, ”said BOBCAPS Equity Research.
Redeem: The IT majors Tata Consultancy Services (TCS) and Wipro recently completed their buyback in January 2021. TCS bought back shares worth Rs 16,000 crore, while the size of Wipro’s offering was Rs 9,500 crore. Wipro bought back 32.3 crore shares, TCS, on the other hand, brought back 5.33 crore shares, or 1.42% of paid-up capital. Infosys completed its last buyout on August 26, 2019. “Infosys is a likely candidate to announce a buyout given its strong FCF / PAT conversion (105% on 9MFY21), strong cash balance and payout ratio plus low, ”the brokerage firm said.
Margins: Given increasing signs of a pickup in hiring, investors would be wary of comments on FY22 margins. With the exception of Tech Mahindra, EBIT margins could decline for all tech companies, at the the exception of Tech Mahindra, which has stopped providing wage increases until FY21, due to wage increases, resumption of hiring as well as the rupee’s slight appreciation against the US dollar. “We expect margins to emerge sequentially for Tier II technologies as well as players like Coforge and Persistent Systems which are expected to stand out relatively on margins this quarter due to company specific factors,” said Manik Taneja and Vikas KG, analysts at JM Financial Services.
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