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IT Services Q2 Preview - Bullish Commentary But Economic Bearishness Can Catch Off-Guard: Dolat Capital

Baring few sub-segments, all IT companies upheld that demand, pipeline and client conversations continue to be positive,

<div class="paragraphs"><p>Staff working on laptop in an office. (Photo: Annie&nbsp;Spratt/Unsplash)</p></div>
Staff working on laptop in an office. (Photo: Annie Spratt/Unsplash)

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.

Dolat Capital Report

Baring few sub-segments (Eg: discretionary retail), all IT companies upheld that demand, pipeline and client conversations continue to be positive, but also admitting volatile macro economic environment.

We take note of Accenture’s FY23 outlook (August year ending) of 8-11% constant currency growth (with inorganic contribution of 2.5%), which we believe indicate sharp growth moderation in CY23/FY24 across vendors.

For Indian peers, we are penciling in growth of 9%/12% for FY24E which is slightly lower than consensus but still holds some downside risk in case macro deteriorates furthermore.

For Q2 FY23 we expect tier-I names deliver growth between 2%-4.7% sequential growth while tier-II are expected to grow in a range of 3.5-6.5% range in CC terms.

Q2 FY23 will see headwinds in form of wage hikes, going back-to office cost which would get negated partially led by strong growth and Indian rupee depreciation.

Click on the attachment to read the full report:

Dolat Capital IT and Digital Services - Q2FY23 Quarterly Preview.pdf

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