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MOSL: Morning India (03/October/18)-1. Technology Preview (2QFY19:Earnings Preview); 2. NTPC-3. Automobiles; 4. EcoScope

MOrning India (03/October/18): 1. Technology Preview (2QFY19: Two propitious strokes – one of order, the other of luck); 2. NTPC (One-off income dilutes the impact of under-recoveries); 3. Automobiles; 4. EcoScope

 

Today’s top research theme

Technology: Preview 2QFY19: Two propitious strokes – one of order, the other of luck

• The usual second-quarter seasonal strength, coupled with the benefits from a favorable currency, is likely to drive a continued recovery for the technology sector. Revenue for Tier-I vendors is likely to increase by 9.4% YoY in constant currency terms (compared to 7.8% in 1QFY19 and 6.8% in 2QFY18), taking further strides toward entering a double-digit growth trajectory.
• Margins at the same time would be uplifted by the depreciation in INR versus the USD, while also getting support from the improving performance. Polarization in performance continues at two levels, within the Tier-I, where TCS is expected to outperform the rest of the pack, and between Tier-I and Tier-II, where the latter would deliver materially higher YoY numbers.
• Bottoming cyclical pressures will feed into valuation multiples favorably, while supportive currency movements will underpin earnings growth, in our view.

Piping hot news

Oil firm near 4-year high as Washington’s Iran sanctions loom

• US oil prices hit their highest level since November 2014 on Tuesday and Brent crude was also near a four-year peak reached the previous day, with markets preparing for tighter supply once US sanctions against Iran kick in next month. US West Texas Intermediate (WTI) crude futures marked $75.90 a barrel around 0630 GMT on Tuesday, their strongest since November 2014. WTI has risen around 18 percent since mid-August. International benchmark Brent crude oil futures were at $85.28 per barrel, up 30 cents, or 0.4 per cent, from their last close.