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Team Research
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MOSL: Morning India (8/April/20): 1. Technology (Expect COVID-19 uncertainty to overshadow 4Q results); 2. Consumer (Commodity costs largely benign); 3. PNB Housing Finance (AUM declines sequentially)

MOrning India (8/April/20):

Today’s top research idea
Technology: Expect COVID-19 uncertainty to overshadow 4Q results
** Second half of 4QFY20 witnessed varying levels of COVID-19 disruption across most of the core markets of IT companies like the US, Europe and even India. We expect MOFSL IT coverage universe to post revenue (USD) / EBIT (INR) / PAT to grow 6%/4%/-2% YoY in 4Q. Given the unprecedented level of uncertainty around the global macro and the multiple moving parts, visibility on near-term growth/profitability is challenged.

** We expect companies to delay their guidance on FY21 outlook or provide a wide guidance band, subject to sharp revisions later on as clients relook at their IT budgets. Commentary around deal closures and ramp ups, expected pressure on pricing, sharing INR depreciation benefit will be important areas of investor focus. Despite the near-term uncertainty, we continue to prefer Infosys and HCLT among large caps, and LTI among Tier II.

** This is attributable to their historical track record in adapting to business challenges/technology change cycles. Besides, we find the P/E multiples of these stocks to be meaningfully lower than their historical averages, offering adequate margin of safety.

Piping hot news
India Panel Recommends Partial Lifting of Lockdown
A panel of Indian government ministers advised Prime Minister Narendra Modi to partially lift the lockdown imposed on March 25 to control the spread of the coronavirus outbreak, people with knowledge of the matter said. Areas with large clusters of Covid-19 cases will remain closed, the people said, asking not to be identified as the discussions are private. The panel, headed by Defence Minister recommended cities can open markets on alternate days after the three week period ends. States can allow harvesting of crops across the country, they added.

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