India IT Services - Uncertainty Persists; Long-Term Demand Continues To Remain Strong: Axis Securities

Axis Securities Report

Accenture Plc's reported Q3 FY24 results stood below street expectations on all financial and operational terms. Revenue for the quarter stood at $16.5 billion, registering a de-growth of 1% YoY (in US$ terms) but growth of 1.4% YoY in local currency. It registered GAAP EPS of $3.04 for the quarter while adjusted EPS stood at $3.13, reporting 3% YoY de-growth.

The company’s new bookings stood at $21.1 billion, Managed Services book/bill was at $11.8 billion, and consulting business bookings stood at $9.3 billion. Overall Q3 FY24 bookings have been resilient, indicating robust demand despite prevailing uncertainties.

The company has robust client relationships, which is reflected in the top 30 clients with quarterly bookings of ~ $100 million. The company continues to witness strong demand for Gen AI – the great accelerator of reinvention – with over $600 million in new bookings

Outlook:

IT services are definitely facing near-term challenges on account of rising inflation rates and potential slowdowns. However, the dovish stance from the Fed indicated an infusion of liquidity, which will lead to a quicker recovery.

Hence, the medium to long-term outlook still remains intact, which is likely to be led by massive technological shifts and rising dependence on the systems. The company continues to see growing demand for Cloud Migration, ERP moderation, and Generative AI.

Enterprise’s need for implementing digital transformation and under-penetration in those areas are the company’s levers for long-term growth

Impact on Indian IT Services companies

We believe strong investments in new edge technologies such as Digital Technologies, Cloud Transformation, IoT, Generative AI, and Machine Learning across verticals will support and accelerate the company’s revenue growth moving forward.

However, near-term macroeconomic headwinds may impact the automation spend across verticals.

On a vertical front, the BFSI vertical witnessed a stronger impact due to a fall in the rural banking sector from North America.

On the other hand, the manufacturing, automobile, retail, pharmaceutical, and healthcare industries are witnessing strong traction across geographies.

IT services companies in India are receiving strong deal bookings despite near-term challenges. While we remain optimistic about the long-term prospects of IT services companies in India, near-term challenges may impact their earnings growth momentum.

Our picks from Largecaps: HCL Tech; TCS

Our picks from Midcaps: Coforge; Persistent Systems; and Cyient

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.