India’s fifth largest IT company will be reporting its Q3FY19 results on Tuesday and it is expected that revenue growth to pick up after two quarters of weakness to 2.8 per cent in constant currency terms QoQ

Business top 5

Representational image  |  Photo Credit: BCCL

1) Tech Mahindra expectation

India’s fifth largest IT company will be reporting its Q3FY19 results tomorrow and we’re expecting revenue growth to pick up after 2 quarters of weakness to 2.8 per cent in constant currency terms QoQ. ET NOW poll is building in topline of $1244 mn. The growth is expected to be led by communication vertical driven by ramp-up of deals and this being a seasonally strong period for Comviva. Enterprise business on the other hand is expected to be subdued due to seasonal furloughs. The operating picture is poised to show an improvement of 20 bps from last quarter, so EBITDA margins are likely to read around 19 per cent thanks to growth, favourable mix and efficiencies from offshore efforts. Profits are expected to be flattish sequentially.

Key monitorables

Recovery in enterprise biz after closure/ramp-down of some healthcare deals in previous quarter

Outlook on communication vertical growth, capex in telecom industry, green shoots of 5G-related spend & rollout globally

Commentary on margin trajectory & scope for improvement in medium-term, risk of Brexit uncertainty

Traction in digital and developing digital landscape

Large deal wins (Q2 TCV $550 mn), deal pipeline

Efforts to reduce attrition (rising for 5 qtrs, Q2 @ 20 per cent)

2) DIVIS @ A LIFE HIGH! 

Stock of Divis Laboratories hit a life high after a 3rd straight quarter of strong PAT growth. In Q3 Gross margins expanded for the 3rd quarter from lows of 59.9 per cent last year to Q3’FY19 margins of 64.2 per cent. Axis Capital believe Divi’s is in a sweet spot given strong chemistry skills/ manufacturing excellence and big pharma’s focus on R&D productivity/ cost reduction. Post Q3 they raise FY19/20/21E EPS estimate by 14 per cent/7 per cent/5 per cent and target price Rs 1740. Maintain BUY given better capex and growth visibility.

DIVIS @ A LIFE HIGH!

Gross Margin   Q3 PAT Growth

Q3    64.2 per cent 68.9 per cent

Q2    63.2 per cent 92.3 per cent

Q1    61.7 per cent 50.8 per cent

3) LUPIN

Pharma major Lupin was once again under the cloud of the US regulator as the recent drug recall by the company was given a damning classification by the regulator. Lupin’s recent drug recall classified as a TYPE 1 recall by the USFDA.

A TYPE 1 Recall is considered by USFDA to be most dangerous & severe classification. Company has recently recalled Ceftriaxone injections manufactured at it’s Mandideep facility.  Company had also initiated a recall of Cephalexin from the same facility. A TYPE 2 classifications is given owing to CGMP deviation & missing manufacturing batch records. The Mandideep facility recently got a Form 483 containing 22 observations from USFDA with analysts attributing close to 10 per cent of US  revenues coming from here.

4) TITAN

It was a titanic Q3 for Titan which caused the stock price to surge to a record high intraday. Jewellery division revenue growth at 37 per cent was the fastest in 5 quarters and it was coupled with robust margin expansion. Even watches and eyewear showed solid momentum with growth of 18.8 per cent and 39.7 per cent respectively. Though watch margin did falter in line with management’s stated guidance of increasing branding and awareness related spends in the segment. Outgoing MD, Bhaskar Bhat in an exclusive conversation with ET NOW said that while Q4 may not see such stellar revenue growth, the wedding season in FY20 looks promising so healthy growth is possible.

Global brokerage house, Credit Suisse says:

We upgrade Titan to ‘Outperform’ from ‘Neutral’, with a target price of Rs 1,175
Market share gains have been exceptionally strong.
Increase earnings estimated by 3-10 per cent.

 

 

[“source=timesnownews”]