IT Services Q3 Preview - TCV Growth Slows, Revenue Growth Steady While Margins Take Priority: Anand Rathi
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Anand Rathi Report
For Ebitda and profit after tax, bases have already turned unfavourable, with expected trailing twelve months and YoY deceleration in Q3. For sale, the base may still support 20% median YoY growth (10-35% at company level) in Q3, Firstsoruce Solutions Ltd. being the exception due to mortgage slowdown.
With the pandemic-triggered volatility behind, we expect 17 of the 18 companies we cover to clock QoQ revenue growth (median 4%). Like sales, QoQ profit after tax growth is also expected to be steady in Q3 but Ebitda is expected to accelerate.
While we expect the industry to maintain a ~20% steady Ebitda margin in Q3, the profit after tax margin though healthy at 12.5%, would be 80 basis points lower than in Q1 FY22, some of it on account of lower forex gains and on cash consumption towards mergers and acquisition.
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