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MOSL: Morning India (5/April/18)-1. Technology Preview 4QFY18: Looking on expectantly; 2. Grasim Industries: Gaining scale via capacity addition; 3. Ecoscope; 4. Capital Goods (Capex)

MOrning India (5/April/18): 1. Technology Preview 4QFY18: Looking on expectantly; 2. Grasim Industries: Gaining scale via capacity addition; 3. Ecoscope; 4. Capital Goods (Capex)

 

Today’s top research idea

Technology Preview 4QFY18: Looking on expectantly; Gradual growth uptick, tier-2’s outperformance to sustain

• In 4Q, YoY revenue trajectory is likely to continue to inch up. We expect such acceleration in INFO, TCS and TECHM, and also organically for WPRO - across our top-tier universe. Revenue acceleration in FY19, despite structural challenges prevailing, is likely to be fuelled by the strong exit from FY18, especially given the usual weakness associated with 4Q, with client focus on freezing budgets for the best part of 4Q's first month and a half. Corresponding aggregate QoQ growth is pegged at 2.9% (~2% in constant currency and 80-120bp tailwind from cross currency).
• We expect aggregate USD revenue growth of 3.5% QoQ across tier-2 IT, 60bp higher than tier-1. While cross-currency movements will rub off positively across the board, the INR, which is a key determinant of margins, has not moved significantly. As a result, barring company-specific turnarounds such as TECHM (+110bp QoQ), MTCL (+90bp QoQ) and KPIT (+80bp QoQ), we expect margins to be range-bound.

Piping hot news

Skymet forecasts: Normal rain expected, ups farm prospects

• Boosting the prospect of robust foodgrain production in the 2018-19 (July-June) crop year — the last two years saw record output — private weather forecaster Skymet on Wednesday predicted a ‘normal’ southwest monsoon with nil chances of a drought. The agency was spot on when it forecast last year’s monsoon rains at 95% of the benchmark long period average (LPA).