Information technology (IT) stocks on Tuesday gained up to 3 per cent a day after Cognizant Technology posted 21 per cent jump in net profit for the quarter ended June 30, and gave a bullish annual revenue outlook.Cognizant has pipped Infosys Technologies to become the second-largest software company in India with a revenue of $1.79 billion (about Rs 9,938 crore) for the April-June quarter this year.Shares of Tata Consultancy Services moved up by 2.86 per cent to settle at Rs 1,264.60 on the Bombay Stock Exchange, while Infosys gained 1.9 per cent to close at Rs 2,255.70.Among others, Wipro was up by 0.83 per cent, HCL Tech gained 1.46 per cent, Oracle Financial Services rose 0.75 per cent, Tech Mahindra moved up by 0.67 per cent and the stock of Hexaware Technologies closed 0.44 per cent up.Following the gains in these stocks, the BSE IT index settled 1.95 per cent up at 5,449.97."Shares of IT companies performed well today on the back of strong set of numbers posted by Cognizant for the June quarter," Milan Bavishi Head Research Inventure Growth & Securities said.For the September quarter, Cognizant anticipates its revenues to be at least $1.875 billion, while for the 2012, it maintained outlook for revenue to be at least $7.34 billion (at least 20 per cent growth compared to 2011).With a bullish annual revenue outlook, Cognizant may remain at the number two spot as Infosys has given a muted guidance of 5 per cent growth for the year, given the uncertainty in the global environment. Infosys expects revenues to be $7.343 billion in FY13.Though Cognizant is not listed in India, 75 per cent of its over 1.45 lakh employees are based in India and is often referred to as an Indian entity.
|Hexaware Technologies - Good show continues - Edelweiss|
|The Q2CY12 results of Hexaware Technologies (Hexaware) were in line with estimates as revenues stood at USD91.2mn, up 3.6% QoQ (4.2% volume growth) vs our and Street estimate of USD92mn. EBITDA margin expanded 50bps to 22.9%, ahead of our estimate of 22.5%. The company seems to be reaping benefits of investments made over the past two years as the decent guidance for Q3CY12 (1.4%-3.0%) in an uncertain environment bears testimony to the same. We believe its continuous investments in strengthening front-end sales team and focus on improvement in operational parameters would drive growth from hereon. Maintain 'BUY' with target price of INR140.Inline quarter on revenue, margin frontHexaware's Q2CY12 revenues at USD91.2mn were marginally lower than our and Street estimate of USD92mn. The sequential growth of 3.6% (4.4% in CC) was driven by a volume growth of 4.2%. The beat on PAT (INR890mn versus estimate of INR834mn) was due to lower forex losses. It has won a large deal of USD100mn spread over four years; revenues from this deal are expected to accrue from early CY13. Further, it is actively chasing four more large deals.Growth to be driven by investments, operational focusThe company has reiterated that it will continue to make investments, particularly in new technology areas in order to drive growth. Further, Hexaware plans to continue to invest in S&M for gaining higher wallet share within clients, particularly beyond its top 20 clients (thus strengthened sales team by 11 in H1CY12). We believe this, coupled with its continued focus on improving operational parameters, will enable it to drive growth and maintain operating margin.Outlook and valuations: Momentum continues; maintain 'BUY'While the Q2CY12 results were in line with estimates but lacked any positive surprise, we believe the momentum remains intact for the company, led by a strong order book build up, besides its continuous investments in the front-end. We forecast 20% USD revenue growth with EBITDA margin of 21%. Higher tax rate of 22% (20% earlier) leads to 4% cut in our CY13 EPS to INR12.7. We maintain 'BUY /SO' with TP of INR140 (11x CY13E earnings). |
MUMBAI: India's mid-tier information technology firms have reported better sales and operating profit growth compared to the biggies in the business at the aggregate level in each of the past five quarters, riding on their intrinsic strengths of operating in niche segments and strong demand in select verticals and bucking the trend of smaller companies taking a beating during a downturn.
At a time when industry leaders such as Infosys and Wipro have provided a sluggish future growth guidance, a clutch of mid-tier IT companies sound far more confident about growth in the next few quarters of FY13. Both analysts and industry officials reckon that this trend is likely to be maintained for at least the next couple of years, which could lead to an improved valuation of these companies.
Software service provider hexaware technologies has reported a 48 per cent increase in net profit at Rs 89.03 crore for the second-quarter ended june 2012 against the same period last year.