IT shares gain on Accenture's strong performance; Infosys, TCS hit new high

Topics TCS | Buzzing stocks | Markets

Analysts at Motilal Oswal Securities see Accenture’s strong 1QFY21 performance as a positive for Indian IT Services
Shares of information technology (IT) companies rallied at the bourses on Friday with sector giants Tata Consultancy Services (TCS) and Infosys hitting their respective record highs, after Accenture reported better-than-expected results for the quarter ending November 30. For all of fiscal 2021, Accenture now sees revenue growth of between 4 per cent and 6 per cent, up from a previous forecast range of up 2 per cent to 5 per cent all in local currency.

The Nifty IT index hit a record high of 23,408, up 2 per cent on the NSE in early morning trade. In comparison, the Nifty50 index was down 0.36 per cent at 13,692 points, at 09:38 am.

Infosys gained 3 per cent at Rs 1,193 and TCS rose 2 per cent to Rs 2,894. Coforge, Larsen & Toubro Infotech, HCL Technologies, Wipro and Tech Mahindra from the Nifty IT index were up in the range of 1 per cent to 3 per cent.

Acceture’s revenue at $11.8 billion, up 2 per cent year on year (YoY) on constant currency terms, was well above its guidance and street’s estimate. EBIT (earnings before interest and tax) margin at 16.1 per cent (+50bp YoY) was driven by lower travel cost and increased utilization (300bp improvement QoQ to 93 per cent, the highest in a decade). The company reported new deal wins of $12.9b, up 25 per cent YoY, in a seasonally low quarter.

The management commentary indicates improving growth trajectory, with 2Q guidance (midpoint at +2.5 per cent YoY) above 1QFY21 revenue growth. It expects 2HFY21 to grow in the high single to low double-digits, aided partially by an improving macroeconomic environment.

Analysts at Motilal Oswal Securities see Accenture’s strong 1QFY21 performance as a positive for Indian IT Services. “We see Accenture’s 1QFY21 earnings and management commentary as a mere reiteration of the adaptability and resilience of its business model.  We continue to form a positive strand on Indian IT, led by positive trends on higher technology spending’s across global companies,” the brokerage firm said in IT sector update.

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