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MOSL: Morning India (3/July/19): 1. Technology 1QFY20 Preview (Margin resilience put to test); 2. Bajaj Auto (Annual Report Update); 3. Bank of Baroda; 4. Sadbhav Engineering

MOrning India (3/July/19): 1. Technology 1QFY20 Preview (Margin resilience put to test); 2. Bajaj Auto (Annual Report Update); 3. Bank of Baroda; 4. Sadbhav Engineering

 

Today’s top research idea

Technology 1QFY20 Preview: Margin resilience put to test

• For 1QFY20, we expect our coverage universe's revenue /EBITDA / PAT to grow 11% / 9% / 4%. While revenue growth traction is intact, margin performance will be key during the quarter. We expect the EBIT margin across the top-tier to shrink by 50-160bp, with the contraction particularly pronounced (100bp+) at TCS, INFO and TECHM.
• TCS' reported margin in 4QFY19 had ~70bp non-recurring charge. The situation is no different for tier-II, where - barring MPHL, HEXW and ZENT - we expect margins to contract by over 100bp for the remaining companies. Organic sequential growth is expected to be stronger at TCS and INFO for tier-I, and MPHL and NITEC for tier-II.
• We continue with our bottom-up stance for sectoral picks, and prefer INFO and TECHM in tier-I, and ZENT and CYL in tier-II.

Piping hot news

Tata Steel set to raise $500 million via foreign loans

• Tata Steel is raising as much as $500 million through syndicated overseas loans to fund expansion and refinance debt, said people with knowledge of the matter. Three-fourths of the amount will be used for the Rs 23,500-crore, second-phase expansion of its Kalinganagar steel plant in Odisha that will raise capacity by 5 million tonnes per annum (mtpa) to 8 mtpa, they said.