Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Thematic (Sector/Industry)

<ul>
<li>Fiscal 4Q 2024 results have shown the first signs of a bottoming in y/y constant currency revenue growth rates, leading to expectations for accelerating growth rates over the medium term.</li>
<li>We have witnessed a steady long-term negative trend in operating margins for most of the industry.</li>
<li>Forward PE ratios are at, or above, long-term historic average trading levels. We find very little upside for these shares whilst maintaining a relative preference for <a href="https://www.smartkarma.com/entities/infosys-ltd" target="_blank" data-smartkarma-citation="entities:267:1" rel="noopener">Infosys Ltd (INFO IN)</a>.</li>
</ul>


Fiscal 4Q 2024 results have shown the first signs of a bottoming in y/y constant currency revenue growth rates, leading to expectations for accelerating growth rates over the medium term.
We have witnessed a steady long-term negative trend in operating margins for most of the industry.
Forward PE ratios are at, or above, long-term historic average trading levels. We find very little upside for these shares whilst maintaining a relative preference for Infosys Ltd (INFO IN).


Indian IT Services: Where Are We in the Growth Cycle?

External broker reports(aggregated public sources), HDFC Securities

HDFC Securities

External broker reports(aggregated public sources)

HDFC securities is the best online trading platform for stocks, IPOs, mutual fund in India. 

Content available is external broker reports authored by a third party outside the Smartkarma network and has been aggregated by an online aggregator through publicly available sources and is displayed by Smartkarma in this format for user's convenience and general informational purposes only. Content does not constitute investment or financial advice and Smartkarma makes no representation or warranty regarding its accuracy or contents. Original third party author retains all copyright and other proprietary rights in the content. Access or use of third party links not controlled by Smartkarma are at the user's own risk.

<ul><li>Hiring trends and job postings have historically been correlated with growth in the sector</li><li>We look at the CompTIA data: the key highlights are (1) tech hiring is expected to accelerate (from 1.2% in CY23 to 3.1% in CY24E) in the US (2) growth in tech workforce is expected across regions, especially in areas with large tech presence of Indian IT (both east/west coast and Texas) (3) tech hiring growth in the automotive OEM region is lower than in most states</li><li>While there are always limitations to tech hiring estimates, the indicators and linearity are pointing to ‘demand recovery’ possibly towards the second half of the year.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Hiring trends and job postings have historically been correlated with growth in the sectorWe look at the CompTIA data: the key highlights are (1) tech hiring is expected to accelerate (from 1.2% in CY23 to 3.1% in CY24E) in the US (2) growth in tech workforce is expected across regions, especially in areas with large tech presence of Indian IT (both east/west coast and Texas) (3) tech hiring growth in the automotive OEM region is lower than in most statesWhile there are always limitations to tech hiring estimates, the indicators and linearity are pointing to ‘demand recovery’ possibly towards the second half of the year.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

IT Sector: Tech Hiring to Recover in CY24

<ul><li>IT sector (coverage universe) growth is expected to bottom out in Q4FY24 and recover ‘gradually’ in FY25E</li><li>The slowdown in macro is still a baseline scenario and lower discretionary spending and slower conversion from TCV to revenue is a feature and not a bug—at least in the near term—and deals will be focused on cost optimisation</li><li>Growth divergence will continue within the sector and guidance for FY25E is likely to factor in improved H2 performance.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

IT sector (coverage universe) growth is expected to bottom out in Q4FY24 and recover ‘gradually’ in FY25EThe slowdown in macro is still a baseline scenario and lower discretionary spending and slower conversion from TCV to revenue is a feature and not a bug—at least in the near term—and deals will be focused on cost optimisationGrowth divergence will continue within the sector and guidance for FY25E is likely to factor in improved H2 performance.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

IT Sector (Q4FY24E Results Preview): Transition period from ‘gradually’ to ‘eventually’

External broker reports(aggregated public sources), Axis Direct

Axis Direct

Axis Direct is the flagship brand under Axis Securities Limited, a subsidiary of Axis Bank in India. 

Content available is external broker reports authored by a third party outside the Smartkarma network and has been aggregated by an online aggregator through publicly available sources and is displayed by Smartkarma in this format for user's convenience and general informational purposes only. Content does not constitute investment or financial advice and Smartkarma makes no representation or warranty regarding its accuracy or contents. Original third party author retains all copyright and other proprietary rights in the content. Access or use of third party links not controlled by Smartkarma are at the user's own risk.

Equity Bottom-Up

<ul><li>Accenture’s Q2FY24 results stood below street expectations on all financial and operational fronts.</li><li>Revenue for the quarter stood at $15.8 Bn, flat in local currency YoY and a decline of 0.1% in US$ terms.</li><li>It registered GAAP EPS of $2.63 for the quarter while adjusted EPS stood at $2.77, reporting 10% YoY growth.</li><li>The company’s new bookings stood at $21.6 Bn, which was its second-highest ever. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Accenture’s Q2FY24 results stood below street expectations on all financial and operational fronts.Revenue for the quarter stood at $15.8 Bn, flat in local currency YoY and a decline of 0.1% in US$ terms.It registered GAAP EPS of $2.63 for the quarter while adjusted EPS stood at $2.77, reporting 10% YoY growth.The company’s new bookings stood at $21.6 Bn, which was its second-highest ever. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Accenture - Uncertainty Persists; Long-Term Demand Continues Strong

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Index Rebalance

<ul>
<li>Over a third of the way through the review period of the June rebalance, we see one potential index change with <a href="https://www.smartkarma.com/entities/wipro-ltd" target="_blank" data-smartkarma-citation="entities:15360:1" rel="noopener">Wipro Ltd (WPRO IN)</a> in deletion zone.</li>
<li>There are a bunch of stocks that could be added to the index as a replacement and price changes over the rest of the review period are important.</li>
<li>Passive trackers will need to trade over 1x ADV and over 7x of delivery volume on the index changes, so there will be decent impact on the stocks.</li>
</ul>


Over a third of the way through the review period of the June rebalance, we see one potential index change with Wipro Ltd (WPRO IN) in deletion zone.
There are a bunch of stocks that could be added to the index as a replacement and price changes over the rest of the review period are important.
Passive trackers will need to trade over 1x ADV and over 7x of delivery volume on the index changes, so there will be decent impact on the stocks.


SENSEX Index Rebalance Preview: Likely Wipro Deletion Opens an Index Spot

India

HCL Technologies Limited provides software development and related engineering services.  The Group's technologies utilize a variety of technologies, including Internet and e-commerce, networking, internet telephony, embedded software, ASIC/VLSI design and testing, satellite and wireless communications, and component based object technologies, including COM, DCOM and COBRA.

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HCL Technologies (HCLT IN)

Indian IT Services: Where Are We in the Growth Cycle?

In this insight, we analyse the long-term growth trends, operating margins, and current valuation levels of Tata Consultancy Services, Infosys, HCL...

Wium Malan, CFA

IT Sector: Tech Hiring to Recover in CY24

While there are always limitations to tech hiring estimates, the indicators and linearity are pointing to ‘demand recovery’ possibly towards the...

HDFC Securities

IT Sector (Q4FY24E Results Preview): Transition period from ‘gradually’ to ‘eventually’

IT sector (coverage universe) growth is expected to bottom out in Q4FY24 and recover ‘gradually’ in FY25E. The slowdown in macro is still a...

HDFC Securities

Accenture - Uncertainty Persists; Long-Term Demand Continues Strong

Accenture’s Q2FY24 results stood below street expectations on all financial and operational fronts. Revenue for the quarter stood at $15.8 Bn, flat...

Axis Direct

SENSEX Index Rebalance Preview: Likely Wipro Deletion Opens an Index Spot

Wipro is a potential deletion from the SENSEX in June. Adani Enterprises is in pole position, just ahead of Coal India. Passives need to trade over...

Brian Freitas

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