Motilal Oswal has come with its December quarterly earning estimates for technology sector. The research firm expects Infosys to guide1.5-2.5% USD revenue growth for 4QFY12 and 16.6-16.9% for FY12. However, given closing INR at ~52/USD, EPS guidance is likely to be maintained.
Expect weak 3QFY12 USD revenue growth marred by cross currency headwinds: 3QFY12 is seasonally weak quarter for the industry, driven by manufacturing and hi-tech industries' furloughs and fewer working days. We expect companies to report 2.1-3.1% USD revenue growth, post 90-170bp cross currency headwinds. Infosys is least impacted with 90bp impact while Wipro, HCL and TCS are likely to be impacted 130-170bp, led by relatively higher Europe and India exposure. 3QFY12 - another quarter of convergence in USD revenue growth for Infosys v/s TCS: Infosys is likely to report USD revenue growth of 3.1% v/s 2.6% for TCS. PAT growth is also likely to be higher at 17.8% QoQ v/s 14.2% for TCS. Earlier, Infosys had guided 3.2-5.4% USD revenue growth. The guidance assumes 100bp impact from cross currency, implying 4.2% volume growth at lower end. Later, the company indicated growth is likely to be closer to bottom-end guidance due to delays in ramp-ups. Infosys could marginally miss even the bottom end of implied volume growth guidance (we model in 4% volume growth). Still, its USD revenue growth is likely to be higher than TCS', post 90bp cross currency impact. Wipro unlikely to spring 3Q positive surprise; prefer HCL Tech on strong deal wins: For Wipro, USD revenue growth will continue to be at lower end v/s peers. We expect Wipro to report 2.1% USD revenue growth in 3QFY12. We continue to prefer HCL Tech on strong deal wins. We expect HCL Tech to win deals with TCV >USD2b in 2HCY11. However, 170bp negative impact from cross currency and seasonal deceleration would keep growth muted for this quarter. Expect cautious commentary, marginal cut in Infosys USD revenue guidance: We expect companies to be incrementally cautious in their commentary, toning down growth expectations. Infosys' comments of a deterioration in the environment, and ability to achieve only the bottom end of the guidance with a further cross currency impact of 50bp in 4Q implies the possibility of a marginal cut in full year USD revenue guidance. We expect Infosys to guide1.5-2.5% USD revenue growth for 4QFY12 and 16.6-16.9% for FY12. However, given closing INR at ~52/USD, EPS guidance is likely to be maintained. Expected quarterly performance summary| Company | Sales | Net Profit | ||||
| Dec-11 | % YoY | % QoQ | Dec-11 | % YoY | % QoQ | |
| HCLTechnologies | 51,684 | 33.8 | 11.1 | 4,776 | 28.3 | -0.5 |
| Infosys | 90,877 | 27.9 | 12.2 | 22,446 | 26.1 | 17.8 |
| MphasiS | 13,876 | 12.5 | 5.6 | 2,146 | 2.6 | 17.3 |
| TCS | 130,889 | 35.4 | 12.5 | 27,836 | 19.5 | 14.1 |
| TechMahindra | 14,823 | 22.4 | 11.2 | 1,207 | -25.9 | 20.9 |
| Wipro | 99,193 | 26.8 | 10.1 | 13,574 | 2.9 | 4.3 |
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