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IDBI Capital Report
Q2 is seasonally strong quarter; however, current macro conditions are expected to impact revenue growth of IT companies. Although IT companies are witnessing strong deal wins led by cost take out deals, annual contract value is still lower (despite high total contract value) due to longer tenured deals, pricing and transition effect.
In addition, slowdown in discretionary spend and new short term projects is hampering growth. For Q2 FY24E, in terms of large caps we expect dollar revenue growth in the range of -0.5%-3.2% and negligible cross currency impact.
Among mid-caps we expect -0.1% to +2% QoQ growth.
In terms of margins, we expect Wipro Ltd. and Tech Mahindra Ltd. to report margin decline mainly led by fall in revenues. Zensar Technologies Ltd. and LTIMindree Ltd. expected to report decline in margins due to wage hikes.
We expect Newgen Software Technologies Ltd. to report robust numbers on YoY basis. HCL Technologies Ltd., Birlasoft Ltd. and Newgen are our top picks.
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