The Hindu Business Line : Analysts await Infosys results for cues

Kolkata, July 9 For stocks in the information technology sector, substantially down from July 2008, the market is looking for cues from the first quarter earnings after a neutral-to-positive Budget impact.

According to analysts, the first quarter results’ season, which kicks off with Infosys’ announcement on Friday, may report decline in sales and PAT (profit after tax) from the fourth quarter ending March 31, 2009.

Surprise element

Market has factored in the possible negatives. But if there were positive surprises in earnings and the guidelines for the forthcoming quarters are better than expected, then values may be re-rated, analysts said.

Mr Anurag Purohit, IT analyst for Religare, said most players are likely to see EBIDTA margins decline Q-on-Q owing to rupee appreciation, lower utilisation rates and seasonally weak quarter. Volumes are expected to remain flat Q-on-Q. Downward pricing witnessed in fourth quarter may ease in some cases and pricing is likely to remain flat. But certain players may have to put up with a marginal decline in pricing.

Cross-currency tailwinds will impact revenues positively for the IT companies, especially for HCL Tech, Tech Mahindra and Infotech Enterprises that have higher non-dollar billings.

According to the brokerage’s estimates, Mr Purohit said, Infosys was likely to report 3.9 per cent drop in sales in the quarter to June against the Q4-FY09. Its PAT may decline by 11.9 per cent. EBIDTA margin may come down to 31.3 per cent from 33.5 per cent.

TCS, which is scheduled to announce first quarter results on July 17 and announce an interim dividend, according to Religare, may see sales fall 2.7 per cent sequentially and PAT decline 5.5 per cent.

Sales Decline

Wipro, on the other hand, is expected to show 0.4 per cent decline in sales in the June quarter against the March quarter. But it is expected to increase PAT 1.5 per cent over the January-March quarter.

On July 22, Wipro board is expected to approve the Q1 accounts under Indian GAAP.

According to a note by Anand Rathi, the Budget proposal on MAT would not have any impact for Infosys. For TCS, it would be negative by two percentage points and for Wipro it would be one percentage point. In the case of Wipro, it would be three percentage points.

Relief

The extension of STPI benefits and relief on fringe benefit tax are considered positive for all.

On Thursday, Infosys closed trading at Rs 1,676.75 after losing 1.70 per cent from the pervious day’s trade on the BSE. TCS closed at Rs 388.60, gaining 2.25 per cent from the previous trade.