IT Sector - Rate Of Change Validated: HDFC Securities

HDFC Securities Institutional Equities

Accenture Plc’s Q4 FY24 results validated signs of improvement for the IT sector. The top-end of Accenture’s guidance factors unchanged macro, ‘yet’ there was a 4% swing in organic growth (from -1% in FY24 to +3% for FY25E).

While the continuity of strong growth in outsourcing driven by large deals can be construed as a positive indicator for Indian IT, the uptick may not be completely secular due to the high share of public services deals by the company.

Positive read-through includes recovery in the growth trajectory of the CMT vertical and a slight recovery in the BFSI vertical. We see validation of growth recovery, GenAI being a net positive (bookings/growth versus headcount impact) along the lines of our recent updates IT sector: recovery signs and Infosys: on your marks, get set.

The base case of growth normalisation in H2 FY25E and subsequent recovery holds. However, the sharp valuation rerating limits the ‘near-term’ absolute upside.

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