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HDFC Securities Institutional Equities
The IT sector is expected to post a soft quarter, impacted by Q3 seasonality and worsening macro. The elements of macro volatility is resulting in growth moderating towards pre-Covid even as long-term drivers are unchanged.
Recently, HCL Tech Ltd. tweaked its FY23E guidance to the lower end, but Accenture maintained its FY23E growth guidance (outsourcing-led). In a seasonally soft quarter with higher impact of furlough, we expect tier-I IT to post within 0.6% to 3.1% QoQ constant currency revenue growth, margin expansion of ~60 basis points QoQ and profit after tax growth of ~5% QoQ.
We have factored in revenue growth decelerating from 13.5% CC in FY23E to 8.5% for FY24E and FY25E.
Concurrently, the profit trajectory is expected to improve ahead in FY24E (versus FY23E) as the supply side crunch eases with demand moderating.
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