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ICICI Securities Report
Post our recent IT thematic, Nifty IT has declined 9% underperforming Nifty50 (down 4%). This is largely due to slowing revenue growth, margin headwinds, elevated consensus expectations and weak macro environment, as highlighted in the thematic.
IT companies' Q4 FY22 performance gave further conviction to our thesis.
Companies like Infosys Ltd./Larsen and Toubro Infotech Ltd,/L&T Technology Services Ltd. missed our revenue estimates by ~1-2% while deal total contract value growth for Infosys/Mindtree Ltd. moderated to ~7%/4% in Q4 FY22 versus ~47%/29% in Q1 FY22.
The banking, financial services and insurance segment too saw a slowdown with Q4 FY22 revenues for Tata Consultancy Services Ltd., Infosys, HCL Technologies Ltd. and L&T Infotech growing ~12% YoY versus ~24% YoY in Q1 FY22.
Despite robust commentaries around Europe, we believe the impact of macro concerns should reflect with two-three quarter lag as discretionary IT spends in Europe have currently paused.
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