IT Services Q1 Results Preview - Deteriorating Macro, Wage Hikes To Impact Earnings: Motilal Oswal

"BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy..Motilal Oswal Report.Our IT services coverage universe is expected to deliver a weak median revenue growth of 0.4% QoQ and 5.3% YoY in Q1 FY24. Major currencies have appreciated against U.S. dollar (€ +1.5% and £ +3.0%), providing favorable tailwinds. However, we expect Ebit/profit after tax to decline 1.8% each QoQ, due to weak topline growth and the impact of wage hikes. For our IT services coverage universe, we estimate USD revenue/ Indian rupee Ebit/ Indian rupee profit after tax to grow at 5.3%/15.2%/16.0% YoY in Q1 FY24. Overall the weakness in demand should continue in Q1 FY24 with a significant hit on discretionary spends. Clients continue to focus on cost and efficiency-driven projects, while keeping the non-critical projects on hold. Though the deal pipeline remains heathy, weak macro will continue to impact revenue conversions, thereby creating near-term pressure on revenues. Banking, financial services and insurance, retail, hi-tech, and manufacturing continue to exhibit sluggish performance. The demand in the U.S. has deteriorated due to increasing inflation and declining consumer spending. On the other hand, demand in Europe remains relatively stable, similar to the levels in Q4 FY23, and deal closures are progressing at a faster pace than in the U.S.Though the demand remains intact for selective verticals and service lines, there is a near-term weakness due to approval delays and heightened deal scrutiny. These factors may result in project deferrals and temporary pauses in project execution. Given the further deterioration in demand environment in Q1 FY24, we do not anticipate a recovery in H2 FY24. The recovery is expected to be more gradual in nature and should occur only in FY25. Additionally, we see a risk of guidance moderation for Infosys Ltd. for FY24..Click on the attachment to read the full report:.IT Services Q1 Results Preview - Will ‘Slower For Longer’ Fears Be Validated? Nirmal Bang.DISCLAIMERThis report is authored by an external party. BQ Prime 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 BQ Prime..Users have no license to copy, modify, or distribute the content without permission of the Original Owner."

IT Services Q1 Results Preview - Deteriorating Macro, Wage Hikes To Impact Earnings: Motilal Oswal

Revenue growth to remain muted; margin to remain under pressure.

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IT Services Q1 Results Preview - Deteriorating Macro, Wage Hikes To Impact Earnings: Motilal Oswal

Revenue growth to remain muted; margin to remain under pressure.

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