Accenture, whose performance and revenue guidance is typically seen as a barometer for the performance of Indian technology companies, reported a 21 per cent growth in revenues at $13.26 billion for the quarter ended May 31, beating its own guidance of $12.55 billion-$12.95 billion in revenues.
Accenture follows September-August financial year.
The IT firm said the company’s operating income rose 24 per cent year-on-year to $2.1 billion. Operating margin for the quarter stood at 16 per cent, an expansion of 40 basis points. New bookings for the consultancy business were up 30 per cent YoY at $8 billion while outsourcing bookings were up 52 per cent YoY to $7.4 billion.
JM Financial said Accenture’s strong Q3 results and the significant rise in FY21 revenue guidance for the year confirm a strong near-term momentum. It sees a greater likelihood of domestic IT firms beating Street expectations in the upcoming results season, which it said could drive slight earnings upgrades.
“We find encouragement in the qualitative commentary and also hopes to see modest expansion in operating margins in the next fiscal. This bodes well on growth for Indian tech confirming the strong underlying strength and also the likelihood to protect margins,” it said, adding that if prefers HCL Tech and Infosys among tier I IT firms.
Motital Oswal Securities said it holds its positive stance on the sector, as it sees sustained growth rates for IT firms for a longer period of time. This brokerage also finds Infosys and HCL Technologies as top bets within the tier I IT space.
Nomura India said it sees a positive read-across for India IT from Accenture’s results. It noted that Accenture’s outsourcing business continued to reflect strength, with a strong 34 per cent YoY growth year-to-date FY21 bookings, with a book-to-bill of 1.2 times.
“Outsourcing is a relevant business from an Indian IT perspective, it said.
Edelweiss said that the strong operational show by Accenture in its outsourcing vertical sets the tone for an upcoming earnings season for the Indian IT service companies. “We reiterate that a robust tech upcycle or Techolution is in its starting phase and may continue for 4–5 years,” it said.
That said Indian IT stocks,
said are pricing in lofty expectations, which are reflected in the life-time high valuations, with Nifty IT trading at a PE premium of 50 per cent over its 10-year average pre-covid PE.
“Disappointments or even in-line results should challenge the sustainability of multiples. We maintaim our anti-consensus cautious stance on the sector,” the brokerage said.
