Indian IT Services
Strong CY10 Budgets Likely: Raise Wipro to Buy, Lower Infy to Hold
发布报告的机构名称： 花旗集团
报告发布时间：2009.08.26
报告页数：43页
报告的文件格式：pdf
报告大小：445k
内容简介：
“Pent up” demand in play? — With most US and global macro data points
suggesting stability or recovery, India’s IT services sector is seeing increased deal
discussions and the start of ramp-ups. If the economic climate remains stable
over the next few months, IT budgets could be strong in CY10E. Note that IT
spends increased by an ~8% CAGR over the 3 years post the previous downturn.
 US recovery, liquidity raising valuations and making them converge; be selective
— Tier-one IT players are trading at ~10-25% premiums to the market, despite
our earnings increase of ~3-18%. Valuations within the sector are converging as
visibility into demand uptick improves, a trend that we think will continue.
Absolute valuations remain liquidity-driven. We recommend staying selective.
 Upgrade Wipro to Buy; downgrade Infosys to Hold — We now prefer Wipro to
Infosys. Wipro will have a higher EPS CAGR over the next couple of years, on our
estimates, and trades at a ~15% discount to Infosys. Wipro is also strong in India/
Asia, and we believe there is upside to FY11 consensus estimates. TCS and Wipro
are the only Buys in the sector (target multiples imply ~10% discount to Infosys).
 TechM, Patni, Mindtree: Hard to see more valuation convergence — TechM faces
challenges in its core business. Patni’s margin increase has positively surprised
but its sharp moves leave little on the table, in our view. Expect better 2Q from
Mindtree, but valuations leave little room for upside. Risk ratings revised.
 Macro risks exist — Positive risks: demand recovering faster than expected;
concern on domestic sectors due to monsoon and fiscal deficit (relative market
play). Negative risks: negative US data (“W” shaped recovery); and strong INR.
目录：
Demand Rising; Pre-slowdown Valuations 3
Global economy: Signs of recovery 3
TPI data also suggest stability 3
S&P EPS data suggest recovery from low base 4
Tech spending: Likely to revive in CY10? 5
What happened to tech spending after previous slowdown? 5
Channel checks suggest stability 5
CTSH results: Key takeaways 6
Currency: INR appreciation is a risk 6
Estimate changes 7
Building in recovery – raising revenue forecasts 7
Short-term operating leverage, but investments to start 7
STPI sunset clause extension to benefit reported earnings 7
How do we compare with consensus on FY11 estimates? 8
Valuations: Back to pre-slowdown levels 9
Tier-I stocks trade at premium to the market 10
Stock price behavior very similar to previous slowdown 11
What about ownership levels? 11
What does DCF analysis suggest? 12
Key premium/discount charts 14
HCL Technologies (HCLT.BO) 16
Infosys Technologies (INFY.BO) 19
MindTree (MINT.BO) 22
Patni Computer Systems (PTNI.BO) 25
Tata Consultancy Services (TCS.BO) 28
Tech Mahindra (TEML.BO) 31
Wipro (WIPR.BO) 34