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MOSL: Morning India (3/January/19): 1. Technology (3QFY19 Preview); 2. Bank of Baroda (Merger with Dena, Vijaya Bank); 3. Financials (Business growth remains healthy); 4. Automobiles (Dec-18 Volumes); 5. Teleco

MOrning India (3/January/19): 1. Technology (3QFY19 Preview); 2. Bank of Baroda (Merger with Dena, Vijaya Bank); 3. Financials (Business growth remains healthy); 4. Automobiles (Dec-18 Volumes); 5. Telecom

 

Today’s top research idea

Technology (3QFY19 Preview): Could macro play a spoilsport in 2019?

• Gradually improving YoY growth rates, anticipated continuum of the same in 3QFY19 and a strong order book have all been indicators of secular strength in demand for IT Services.
• However, slowdown of US macro, escalation of the US-China trade war and immediate ramifications of Brexit cast doubt on the macro front.
• Growth is expected to continue accelerating into 3QFY19 (our estimate: 8.9% YoY CC), contributed by good progress at each of the top-5 clients. We expect 11.7% YoY growth at TCS - the highest among tier-I - while TECHM should lag with 4.7% YoY CC growth, given sluggish momentum in Communications. We expect growth at INFO to accelerate to 9% YoY CC from 8.1% in 2QFY19.
• On a sequential basis, HCLT is expected to lead growth at 4.5% QoQ CC, aided by acquisitions and deal ramp-ups. On the profitability front, expectations from INFO are muted and strong at WPRO. Our top picks are INFO, TECHM, MTCL and ZENT.

Piping hot news

Manufacturing PMI slows in December; still second highest in 2018

• Factory production took a breath in December as the Manufacturing Purchasing Managers’ Index (PMI) slowed down a bit to 53.2 in December as against 54 in November. However, it is still in expansion mode. According to the report, the health of India’s manufacturing economy improved further at the end of the year, as companies continued to scale up production and employment in response to strong inflows of new business.