IT, Internet, BPO, KPO Q4 Preview - Sustained Furloughs, Flat Spending To Weigh On Growth: Dolat Capital

Dolat Capital Report

We anticipate another subdued quarter with revenue growth of -1.5% to +1.4% QoQ in constant currency terms amongst our tier-I IT names, and 2.3% to 4.9% CC growth for tier-II names for Q4 FY24E, amid delayed revenue conversion and muted demand environment.

Ebit margin is expected to improve sequentially for most IT companies driven by cost optimisation initiatives partially offset by sustained furloughs impact and will see QoQ movement of -50 basis points to +210 bps in Q4 FY24E.

Our interactions with industry participants indicate banking, financial services and insurance and communication, media and technology continue to reflect pain especially in U.S. led by weak macro environment as well as cost cutting program as highlighted by large banks such as Barclays, Citibank, etc. in their earning’s call.

We continue to maintain a cautious stance in the near term, as we anticipate that the subdued deal wins, and delayed revenue conversion will have an impact on growth in Q4/Q1.

The NIFTY IT index declined sequentially (-2.2%) in Q4, and we anticipate it to remain under pressure, as any recovery in discretionary spending will likely have a time lag of a few quarters.

Our preference is for large caps, given lower risk to estimates/price-to-earning ratio.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.