IT Services Q2 Results Review- Despite BFSI Revival, Margin To Experience Flat To Negative In H2: IDBI Capital

IDBI Capital Report

Decent quarterly results were seen for companies in our coverage universe majorly headed by revival in banking, financial services and insurance vertical (average +2%/+5%YoY QoQ/YoY in large cap and avg +16%/+14% QoQ/YoY in mid-cap), driven by Europe (average +4%/5% QoQ/YoY) especially for large caps.

There is a limited upside potential left of winning large deal wins (transformational projects) in H2 but cost take out projects likely to continue in similar pattern.

Elongated decision making cycle, softness in various verticals (such as manufacturing & retail) coupled with political uncertainty indicates demand environment to remain cautious in the near term. Despite modest revenue growth in H1, higher utilization rate, modest sub-con cost, lower discretion, lower general and administrative expenses and lower discretionary cost help expand the margin for large caps by ~50 bps (average) whereas midcap witnessed contraction in margin by ~65 bps (average) within our large cap/midcap universe. We expect no positive surprise in terms of growth in H2 FY25 due to upcoming furloughs and softness in non-BFSI segment.

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.