Accenture - Positive read-through for Dec-20. But, beyond that...? - ICICI Securities

Accenture's strong performance in outsourcing (+8% YoY, CC) is a positive read-through for Indian IT. This is a decent lead indicator of a residual 'comeback' by Indian IT in the impending earnings season. New booking strength (+25% YoY) is encouraging. However, even on the upgraded revenue growth guidance (+3-5% YoY, Organic, CC, adjusted for reimbursements), the implied CQGR over next three quarters (-2.0% to -0.8%) is low. Despite a very weak base, FY21 revenue guidance post Q1 is still ~100bps lower than the company's conventional guidance band (6-8% YoY) at the beginning of the fiscal. Even building-in a buffer for further upgrades, FY21E growth is likely to be largely similar to pre-Covid levels. This is in line with the recent sentiment expressed by Infosys and our argument that growth rate of the industry will not materially accelerate post Covid. Other key differences to keep in mind before extrapolating the results to Indian IT: 1) Accenture's relative exposure to healthcare (+11% YoY, CC) - the key growth driver; 2) currency denomination of revenue-costs (in context of stronger INR); and 3) under-performance of the stock (vs Indian IT, YTD).

Source : Equity Bulls

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