Tata Consultancy Services (TCS), India’s largest IT company, will open the earnings season next week by releasing fourth quarter 2021 results scheduled for Monday, April 12, 2021. TCS’ share price rose 11% from January to March 2021, and over the 12 months (Year to date, it has risen 16%. For the three months ended March 31, 2021, the Nifty IT index was up 6.61%, compared to a 5% increase for the Nifty 50 index. Analysts believe that the fourth-quarter performance last year continued to be driven by improving demand and significant project wins.
IT companies have reported better-than-expected earnings for the past two quarters. Analysts expect company revenues to remain strong this quarter, driven by several deals and continued spending on digital packaging.
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Despite the sharp decline in the first quarter of FY21, we expect most companies, except for Wipro and Mindtree, to end FY21 with flat or low single-digit revenue,” said Ruchi Burde and Sima Nayak, analysts at BOB Capital Markets. COVID-19. During the COVID-19 pandemic, IT companies actively managed cash due to demand uncertainty and lack of earnings visibility in the early months of the pandemic.
Earnings
Broker-analyst Prabhudas Lillader gave a “buy” rating to all the IT stocks he was defending, including Infosys, TCS, Wipro, HCL Technologies, and Mindtree.TCS posted daily earnings growth in the first quarter of this year. This came shortly after the company ended its growth cycle in the third quarter of the previous year. Analysts at Reliance Securities believe the annual payroll growth cycle will be shorter due to sequential declines in profitability, modest cash increases on total sales and production capacity, and currency headwinds.
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Massive business gains. According to national broker Kotak Institutional Equities analysis, dealmaking in the final quarter of FY21 is expected to be strong, and the pipeline will remain healthy.” TCS expects revenue growth over the previous quarter driven by two large deals with a contract execution value (CEV) of $1.3 billion to $2.6 billion (Prudential Monetary), a number of sales received in the last quarter of $50 million to $100 million, and strong demand in the cloud and specialty buyer space.
FY22 Guidance. Most analysts expect vital commentary, new contract signings, and an optimistic outlook.” Edelweiss Analytics added, “We believe that the direction of IT company growth over the past three quarters can be factored into consensus forecasts for the coming quarters. We know that demand from global IT companies remains strong, as evidenced by Accenture’s 2.5 percent performance in FY21, outsourcing, and double-digit growth in cloud computing in Q1 and Q2 of FY21 . BOBCAPS says in its stock analysis, “We believe Infosys, HCL Applied Sciences, L&T Infotech, Wipro and Coforge will post healthy double-digit annual growth in FY22.
BuyBacks
IT giants Tata Consultancy (TCS) and Wipro have completed share buybacks in January 2021. TCS and Wipro have completed share buybacks worth Rs 16,000 and Rs 9,500 million, respectively. Infosys completed its latest buyback on August 26, 2019.” He said, “Infosys is likely to announce a share buyback due to its high FCF/PAT conversion ratio (105% in FY09/21), stable capital, and low payout ratio.
Traders will be cautious in commenting on FY22 margins amid rising employment. EBIT margins are likely to be lower across all technology companies, except Tech Mahindra, which stopped raising wages ahead of FY21, due to increasing wages, expanding employment opportunities, and a slightly stronger rupee against the dollar.” Manik Taneja and Vikas Okai Ji, analysts at JM Financial, said, “We are seeing a steady decline in margins for second-tier technology companies, with players like Coforge and Persistent Systems facing the fourth quarter due to company-specific factors. We expect them to face relative margins this quarter,” he said.
