Edelweiss expects the top-tier companies to report quarter-on-quarter revenue growth of about 6-9% in rupee terms and 8-11% in dollar terms, with Infosys and Satyam leading the pack. As annual wage hikes and visa costs have already been incurred in Q1 of the current fiscal, this may have an impact of about 150-200 basis points on EBITDA margins of TCS and Infosys.
However, Satyam and Wipro give wage hikes during the second quarter, which will impact margins. Sequential net profit growth of the companies is likely to be muted relative to top line growth, as other income, including forex hedging gains, in Q1 may not repeat on the same scale in Q2.
As per SSKI estimates, rupee appreciation may shave off 1.5% from the growth.
Citigroup expects Infosys and Satyam to raise dollar revenue guidance for the current fiscal by 2-3% after a strong Q2. But Infosys might give conservative rupee guidance on expectations of further appreciation in the rupee.
According to brokerage firm Motilal Oswal, Infosys outlook on demand scenario in light of recent developments in the US economy would be a key factor, since it would set the tone for expectations in terms of IT budgets in 2008.
Infosys had cut its current fiscal's EPS guidance after the Q1 results to Rs77.3-78.1. But considering that in the last three years, post Q2 results the company has raised its US GAAP revenue guidance by an average 4% and earnings guidance by an average 5%, Motilal Oswal expects it to raise its EPS guidance to Rs79.3-80.6.
Satyam could positively surprise on revenues and while we expect flattish Q-o-Q profits on its annual wage hike quarter, we expect the company to beat its (-)5% Q-o-Q profit guidance. The company has been sounding positive on the revenue outlook and could surprise by upping dollar revenue guidance, predicts Merrill Lynch.