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MOSL: TECHNOLOGY-Upstream commentary hints at flat budget

Technology: Upstream commentary hints at flat budget

 

Continued growth deceleration led by US/BFSI

• Organic growth in aggregate revenue of Tier I (6.3% YoY, USD) has moderated slightly from the previous quarter. HCLT (8.4%)/Wipro (2.4%) have outperformed/underperformed the top-5 on organic growth.
• This deceleration was mainly led by key verticals like BFSI/ENU (~3%/6%, organic, ex-HCLT). Other verticals like Retail/Communications/Healthcare (5%/11%/11%, ex-HCLT) have exhibited growth acceleration.
• Retail revenue growth acceleration was driven by (i) a low base and (ii) an increase in spending by e-commerce. However, this vertical still remains weak and thus a key overhang on overall growth of Tier I.
• Among geographies, the US (6.8%, Tier I ex-HCLT) continued exhibiting secular deceleration in revenue growth. Only in case of TECHM, US growth accelerated – albeit marginally – due to the ramp-up of the AT&T deal.
• Aggregate revenue growth in Europe + UK (5%, organic, ex-HCLT) accelerated slightly, led by better growth in the Europe portfolios of TCS and TECHM.
• Overall, Tier I’s aggregate revenue growth (~8% YoY) decelerated marginally. HCLT (15.5%)/Wipro (2.4%) outperformed/underperformed the top-5.
• Aggregate revenue growth of our Tier II coverage (7.5%) also decelerated marginally, led by all companies – except LTI (13.7%).