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While Tech Mahindra's earnings show for the quarter were mixed, the deal wins and pipeline are strong, according to brokerages.
Ahead of Tech Mahindra's Q3 results, the market was eagerly anticipating updates on the company's wage hike timeline. The wage hike is expected to adversely impact Q4 margins, with an estimated impact of 1-1.15 percent.
Tech Mahindra's margins are likely to expand in the September quarter because of easing supply-side constraints, lower visa costs, falling attrition, improved utilisation, and reduced subcontracting costs
Brokerages also expect a muted deal win for the company in the quarter at around $500 million. In the results commentary, they will watch out for strategies for turnaround from the new CEO and outlook on the telecom vertical
The Mahindra Group firm is likely to report a net profit of Rs 1,107 crore, representing a decline of 2.12 percent YoY amid global headwinds, as per analysts.
Tech Mahindra Q3 preview: The IT services frim's consolidated revenue, in rupee terms, is expected to rise 18% YoY and 3.7% QoQ to Rs 13,612 crore
Analysts expect constant currency growth of 2.4 percent on a quarterly basis
Net Sales are expected to increase by 3.4 percent Q-o-Q (up 20.8 percent Y-o-Y) to Rs. 13,144.7 crore, according to KR Choksey.
The deal wins for the quarter ended June 2022 could be in the range of $750-800 million, the brokerages said.
Net Sales are expected to increase by 3.4 percent Q-o-Q (up 22.8 percent Y-o-Y) to Rs. 12,530 crore, according to Motilal Oswal.
Kotak expects Infosys to maintain full year revenue growth guidance at 12-14 percent in constant currency terms and the EBIT margin band at 21-23 percent.
Net Sales are expected to increase by 5.7 percent Q-o-Q (up 24.4 percent Y-o-Y) to Rs. 12,105.1 crore, according to Prabhudas Lilladher.
Management commentary on large deals pipeline and deal closures would be important to gauge confidence on growth continuity and better predictability, says Emkay Global.
The Pune-based company may report a 4.4 percent sequential growth in consolidated net profit to Rs 1,397.5 crore, say analysts
Net Sales are expected to increase by 5.4 percent Q-o-Q (up 18.9 percent Y-o-Y) to Rs. 11,466.8 crore, according to Prabhudas Lilladher.
Net Sales are expected to increase by 4.4 percent Q-o-Q (up 17.8 percent Y-o-Y) to Rs. 11,360.7 crore, according to ICICI Direct.
Net Sales are expected to increase by 4.8 percent Q-o-Q (up 14 percent Y-o-Y) to Rs. 10,683.1 crore, according to Prabhudas Lilladher.
Brokerages expect IT stocks to continue trading at premium valuations given the order pipeline and digitalisation. Infosys, Tech Mahindra and HCL Technologies are the top consensuses picks.
Key things to watch out for - FY22 revenue and margin outlook, deal pipeline in telecommunication & enterprise segment and attrition rate noting that the company has been harsher than peers in cutting variable compensation, etc.
Net Sales are expected to increase by 0.9 percent Q-o-Q (up 2.5 percent Y-o-Y) to Rs 9,732 crore, according to KRChoksey.
Net Sales are expected to increase by 4.2 percent Q-o-Q (up 69.8 percent Y-o-Y) to Rs 1,365 crore, according to Prabhudas Lilladher.
Net Sales are expected to increase by 1.5 percent Q-o-Q (up 3.2 percent Y-o-Y) to Rs. 9,790 crore, according to Motilal Oswal.
Along with the numbers, all eyes will be on the management's commentary on deal wins and outlook on communications and enterprise segments.
The deal pipeline is strong across companies led by digital foundation deals, integrated deals from smaller clients, experience transformation and even core transformation deals.
Centrum Institutional Research expects Tech Mahindra to deliver constant currency revenue growth of 1.6 percent QoQ.