ACN reiterated FY23 revenue growth guidance to 8-11% YoY CC (inorganic contribution of ~2.5%), led by double-digit growth in managed services. Q2FY23 guidance of 6-10% YoY CC reflects decelerating growth, given the ongoing macro challenges.
Growth in Q1 was led by managed services (+20% YoY CC), while consulting (+10% YoY CC) saw moderation. EBIT margin stood at 16.5% (+20 basis points YoY), with ACN maintaining FY23 EBIT margins of 15.3-15.5% (+10 basis points to 30 basis points YoY). New bookings also moderated to USD16.2 billion (+6% CC YoY), as growth in managed services (+10% YoY) was offset by decline in consulting (-14% YoY); management indicated that the pipeline remains healthy.
ACN highlighted that given the macro uncertainty, near-term growth could be impacted by slowdown in smaller strategy and consulting deals but the medium-term focus on compressed transformations continues.
Broad-based growth across verticals
Among verticals, resources led the way, growing 21% CC YoY this quarter. Healthcare & Public Services and Products remained healthy at 15% CC YoY. Financial Services and Communication saw moderation in growth to 13%/11% CC YoY. Despite ongoing macro concerns, themes of cloud and compressed transformations remain, as per the management. Client’s focus on RoI is leading to larger transformation projects with cost agendas, rather than smaller deals focused on revenue acceleration.
Managed services new bookings remain more resilient than consulting
New bookings for the quarter increased 6% CC YoY (-3% YoY in USD terms) to USD16.2 billion — reflecting moderation in demand momentum. In Q2, there were 24 clients (26 in Q1) with over USD100 million in bookings. Bookings for managed services remained more resilient growing 10% YoY, while consulting bookings declined 14% YoY. Management indicated that they expect bookings to bounce back in Q2. ACN reiterated FY23 EBIT margin guidance of 15.3-15.5% (+10 to 30 basis points YoY).
Notables
Indian IT better placed, given Managed Services resilience
Analysts at IIFL Securities believe ACN’s Q1 results and FY23 organic growth outlook of 5.5%-8.5% CC YoY (versus average FY18-20 outlook of 3-6% at its outset), combined with the resilience in Managed Services bookings bodes well for Indian IT Services companies. Overall, they believe that the focus shifting to Managed Services should benefit India IT more; growth in the medium term should remain higher than pre-COVID levels. Analysts at IIFL Securities prefer stocks with better growth visibility among large caps (Infosys) and midcaps (Persistent Systems, LTIM and Cyient).
Related Tags
IIFL Customer Care Number
(Gold/NCD/NBFC/Insurance/NPS)
1860-267-3000 / 7039-050-000
IIFL Securities Support WhatsApp Number
+91 9892691696
www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.
Stock Broker SEBI Regn. No: INZ000164132, PMS SEBI Regn. No: INP000002213,IA SEBI Regn. No: INA000000623, SEBI RA Regn. No: INH000000248
This Certificate Demonstrates That IIFL As An Organization Has Defined And Put In Place Best-Practice Information Security Processes.