Angel Broking has come out with its earnings estimates on IT sector for December quarter FY13. The research firm expect volume growth to be in the range of 2-3% qoq for tier-I IT companies, with TCS leading the pack. Pricing is expected to remain stable. For tier-II companies, we expect growth to be modest at 1.0-8.0% qoq, with Tech.
Angel Broking Q3 earnings estimates for IT sector: Mixed economic data indicates flat CY2013 IT budgets The Indian IT services industry is likely to touch ~USD 98 billion in FY2013 according to Nasscom, close to 6x of where it was in FY2004, a CAGR of 13% over the past five years. Gartner's current US dollar growth forecast for the overall global IT spending in 2012 has been revised up slightly from 2.5% last quarter to 3.0% now but in constant US dollar terms, the forecast growth for overall IT spending in 2012 is unchanged at 5.2%. While the challenges facing global economic growth persist - the eurozone crisis, weaker US recovery and a slowdown in China - the outlook has at least stabilized. Also, according to IDC, a market research firm, the global IT spending is expected to grow by 6% in 2012 in constant currency, slightly down on last year's pace of 7% growth. Our take: Given the current uncertain environment, we expect volume growth of tier-I Indian IT companies to scale down to sub-12% in FY2013. The BFSI industry, from which IT companies derive maximum revenue, is expected to be a laggard in terms of growth. A weak performance from these accounts due to weaker-than-anticipated acceleration implies industry-wide slowdown in IT spending. The IT spend now is driven by trends such as increased offshoring of work from Europe and vendor consolidation. Market share gains in the renewal deal pipeline will be a key differentiator of volume growth across players in our view. Management commentary within the sector provide a mixed outlook for 2013 IT budgets as of now. Early comments from managements indicate that IT budgets will remain flattish in CY2013. Cyclically a weak quarter with decent volume growth Traditionally, 3Q is a weak quarter for IT companies as the number of working days is less compared to other quarters, due to the holiday season at the client sites. We expect 3QFY2013 volume growth to be impacted slightly because of Hurricane Sandy in the US and furloughs seen in the banking and financial services space. For 3QFY2013, we expect volume growth to be in the range of 2-3% qoq for tier-I IT companies, with TCS leading the pack. Pricing is expected to remain stable. For tier-II companies, we expect growth to be modest at 1.0-8.0% qoq, with Tech.Quarterly estimates (Rs Cr.)| Company | Net Sales | Net Profit | ||
| 3QFY13E | % chg | 3QFY13E | % chg | |
| TCS | 15,926 | 2 | 3,367 | -4.1 |
| Infosys | 9,961 | 1 | 2,157 | -9 |
| Wipro | 10,974 | 3 | 1,585 | -2 |
| HCL Tech* | 6,161 | 1.2 | 801 | -9.5 |
| Tech Mahindra | 1,755 | 7.6 | 313 | 5.7 |
| Mah. Satyam | 1,942 | 0.2 | 277 | -0.5 |
| Mphasis^ | 1,353 | 3.6 | 195 | -6.8 |
| Hexaware | 496 | -2.4 | 60 | -28.5 |
| Mindtree | 593 | -0.5 | 75 | 4.2 |
| Persistent | 329 | 0.5 | 52 | 15.8 |
| KPIT Cummins | 565 | -0.3 | 57 | 41.3 |
| Infotech Entp. | 486 | 1.8 | 60 | 19.5 |
Note: Price as on December 31, 2012; *June ending so 2QFY2013 estimates; ^October ending so 1QFY2013 estimates; #December endingso 4QCY2012 estimates; Change is on a qoq basis. Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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