The third quarter earnings season kicks off on Monday, with
or TCS slated to post its numbers. Infosys will follow suit with its quarterly performance due later in the week on Thursday.
Past trend over the last 12 quarters have show that Infosys has managed to beat TCS in revenue growth on quarter-on-quarter (QoQ) basis on eight occassions or nearly 70% of the times. But in Q3 FY23, TCS might defy the trend.
Brokerage estimates remain mixed although majority see TCS outshining Infosys. TCS is expecte to post 2.2-3.8% revenue growth sequentially as against 2-4.7% growth seen in Infosys.
Anand Rathi analysts peg 4.7% QoQ revenue growth for Infosys at Rs 38,250.7 crore while for TCS it sees revenue growing by 3.6% QoQ to Rs 57,282.1 crore. On the other hand, Nomura, ICICIDirect and Nuvama Research expect TCS to put up a better show. Further, expects Infosys to retain its FY23 revenue guidance at 15-16% CC YoY.
According to analysts, this quarter is expected to see furloughs higher than in the last couple of years, which are likely to hit overall revenue growth although margin pressure is expected to decrease due to easing of supply side pressure.
“Q3FY23 is seasonally weak, and aggravated by global macro headwinds this time. A stable performance in spite of the odds reinforces our positive stance on the sector. Accenture’slatest results too allude to strong undercurrents of growth and demand environment in IT outsourcing,” wrote Nuvama Research analysts Vibhor Singhal and Nikhil Choudhary in a note.
While the soft performance during the quarter is largely priced in the share price performance of IT companies, investors will be keenly eyeing the commentary from management on demand scenario, attrition levels or any tweak in guidance.
What to buy: TCS or Infosys?
Global brokerage Nomura prefers largecaps over midcaps in the IT pack in the current environment, as it believes earnings risks are material in midcaps in a slowing demand outlook.
In largecaps, its top buy idea is Infosys while it has a reduce call on TCS.
As for Emkay Global, it has a buy call on Infosys and Hold on TCS and ICICIDirect lists Infosys as its top pick from the sector.
Out of the 40 analyst calls on TCS, 12 are hold, 11 are strong buys, eight buy, five sell and four strong sells, shows Trendlyne data. Similarly for Infosy, out of 40 analyst calls, 25 are strong buys, nine buys, five hold and one sell rating.
In the last one year, TCS shares are down 17% vs a 21% fall in Infosys.
(Data Inputs: Ritesh Presswala)
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
