DSIJ.in JULY 22 - AUG 4, 2019 I DALAL STREET INVESTMENT JOURNAL (^89)
95.18 crore in FY19. Cigniti Technologies, D-Link (India) and R Systems International reported a growth in operating profit of 155.11 per cent, 152.03 per cent and 73.29 per cent, respectively. On an average, the net income in the sector rose by 13.37 per cent YoY in FY19. Infibeam Avenues, Intellect Design Arena and Cigniti Technologies reported growth in PAT of 188.72 per cent, 148.30 per cent and 358.02 per cent, respectively. Vakrangee, Matrimony.com, Aptech and Allsec Technologies recorded a fall in net income by 96.29 per cent, 41.62 per cent, 72.72 per cent and 73.68 per cent, respectively. Our observation is that usually, the first quarter of a fiscal year is seasonally strong. However, the revenue momentum is weakening in FY20. Moving forward, investors should watch out for management commentary regarding the demand outlook. Deal wins and execution will improve revenue visibility. Although the prominent IT players boast a healthy deal pipeline, the pace of deal wins has certainly fallen owing to the subdued macroeconomic environment. The need of the hour is to see some improvement in demand in the domestic market as well as in the US. Companies such as TCS seem to be on track for achieving double-digit revenue growth in FY20. Wipro kicked off FY20 with a slow start owing to volatility in the consumer vertical in Q1FY20. The small-cap IT companies are looking at good prospects with the potential for substantial upside in stock performance and good valuations. The Indian IT and ITeS industry grew to US$ 181 billion in FY19. The exports from the industry rose to US$ 137 billion in FY19. Moreover, the domestic revenues (including hardware) climbed to US$ 44 billion. The decline in global client spending is likely to put the Indian IT sector under pressure. Although the global IT services spending is expected to cross the US$ 1 trillion mark to reach US$ 1.031 trillion in 2019, the pace of growth is likely to drop to 3.8 per cent in 2019 as against 6.7 per cent in 2018. IT firms are well-known for indulging in share buybacks in order to return money to shareholders with ease, rather than shelling out dividends. However, the 20 per cent tax levied on buyback considerations less issue price has rendered buybacks less attractive. This is detrimental for the valuations of the IT sector. The buybacks enabled smart capital allocations, which helped IT companies achieve attractive valuations. However, the tax imposed on buybacks has taken away the incentive to make share repurchases. The impact on TCS and Infosys will be limited. However, players like Wipro will face some challenges in compensating shareholders through the buyback route. IT and IT-enabled services (ITeS) continued to be the top job creators in India in May 2019. Based on the data released by the Department of Industrial Policy and Promotion, the core competencies of the firms operating in the IT space succeeded in attracting significant foreign direct investments (FDIs). Noteworthy players such as Infosys, Wipro and TCS are diversifying their offerings and demonstrating commendable ideas in blockchain and artificial intelligence. Overall, 2019 seems to be an arduous year for the IT sector as the services market is experiencing slowdown on the back of economic concerns such as Brexit and burgeoning trade war tensions. 83.93 135.21 133.45 18.98 21.50 21.96 -37.93 36.18 30.29 33.64 375.00 191.00 197.00 35.53 73.66 62.73 17.23 6.76 -4.29 -51.77 23.80 24.09 22.03 2170.00 1088.00 1144.00 14.92 17.69 34.94 8.32 11.84 12.75 -15.65 17.37 16.16 17.59 1206.80 904.80 486.10 62.74 60.39 39.72 19.49 23.83 16.20 3.89 25.13 28.55 22.08 271.26 278.45 285.36 48.43 43.01 32.05 12.90 34.55 15.01 12.59 22.74 22.06 19.07 443.70 441.70 438.77 87.12 64.65 56.77 29.28 58.61 36.24 34.76 35.20 32.82 38.00 17.40 17.20 17.10 144.94 139.56 123.85 9.53 18.41 12.03 3.86 32.57 31.13 26.28 42.88 42.67 42.47 42.11 -1.95 11.23 16.46 21.13 65.49 NA 31.51 9.78 29.02 122.12 121.77 121.22 57.64 43.34 37.62 18.11 24.61 28.16 33.01 20.16 14.46 13.22 186.23 193.27 210.42 45.93 34.78 24.92 28.53 43.75 32.28 32.03 25.09 21.54 16.82 164.20 163.90 168.00 19.62 16.83 13.88 17.90 12.01 16.83 16.59 27.60 27.51 26.99 59.47 59.36 60.41 45.56 40.73 44.12 22.89 29.36 36.73 11.85 18.00 16.79 19.66 61.80 61.50 61.40 43.34 36.00 30.53 17.87 16.44 13.83 20.38 19.29 18.44 16.17 55.20 56.28 56.28 53.69 52.34 64.88 27.63 31.38 29.28 2.56 15.86 17.60 24.23 45.04 44.99 44.87 21.99 15.91 10.07 25.44 44.92 39.27 38.23 19.04 16.29 11.44 51.47 51.06 50.68 44.45 40.39 37.68 10.95 18.67 8.85 10.06 15.79 16.16 17.11 79.12 80.00 80.00 6.43 10.03 7.46 -76.80 NA -96.29 -35.92 29.47 29.28 31.28 105.88 105.88 52.92 18.55 15.07 15.08 20.66 45.29 29.54 23.06 30.90 29.57 35.27 10.39 10.38 10.37 5.47 4.76 4.10 8.23 16.68 15.68 14.94 14.97 15.00 14.76 691.07 686.52 681.31 EPS () YoY Growth FY19 (%) RoNW (%) Equity (` in Cr.)
FY19 FY18 FY17 Sales Operating Profit PAT EPS FY19 FY18 FY17 FY19 FY18 FY17
martin jones
(Martin Jones)
#1