TechM Jun’23 Quarter Results – Disappointing Performance

Actual vs. expectations

Operating performance misses expectations.

Likely stock reaction

Negative

Result Summary

TechM reported revenues of USD1.6bn, down 4% QoQ (-4.2% CC), below our expectations of USD1.64bn.

EBITM declined by ~440bps QoQ to 6.8%, 370bps below our expectations of 10.4%.

IT services segment margin contracted 510bps QoQ to 9.1%. BPO segment margin contracted 170bps QoQ to 17.3%.

Profits at Rs6.9bn, declined by ~38% QoQ, below our estimates of Rs11.1bn, due to all round miss.

Net new deal intake at USD359mn (vs. USD592mn in Q4).

Comparison with other Tier-1 cos Jun’23 performance:

Q1FY24 revenues: TCS: USD7.2bn, flat CC QoQ; Infosys: USD4.62bn, 1.0% CC QoQ, Wipro IT Services: USD2.77bn, -2.1% CC QoQ; HCLT: USD3.2bn, -1.3% CC QoQ.

TCS IT services EBITM declined ~130bps QoQ to 23.2%; Infosys EBITM declined ~20bps QoQ to 20.8%, Wipro IT services EBITM declined ~20bps QoQ to 12.05%; HCLT EBITM declined ~120bps QoQ to 17.0%.

Growth by Verticals (in USD)

Communication, Media & Entertainment: -9.4%QoQ (vs. 0.7% QoQ in Mar’23)

Manufacturing: 1.8% QoQ (vs. 1.5% QoQ in Mar’23)

Retail, transport & logistics:  -0.3% QoQ (vs. -10.4% QoQ in Mar’23)

Technology: 0.1% QoQ (vs. flat QoQ in Mar’23)

Banking, financial services & insurance: -3.2% QoQ (vs. 0.3% QoQ in Mar’23)

Others: -0.1% QoQ (vs. 2.7% QoQ in Mar’23)

Growth by Geographies (in USD)

US: -0.5% QoQ (vs. -0.3% QoQ in Mar’23)

Europe: -6.7% QoQ (vs. 3.5% QoQ in Mar’23)

ROW: -8.2% QoQ (vs. -2.9% QoQ in Mar’23)

Manpower details

Total Headcount: 148,297, net reduction of 4,103 sequentially

LTM Attrition: 13%, V/s 15% in Mar’23 quarter.

Utilization (ex-trainees) was 87% vs 86% QoQ.