homeearnings NewsIT Q4 earnings round up: Midcaps outperform as large caps see revenue and margin declines
IT Q4 earnings round-up: Midcaps outperform as large-caps see revenue and margin declines
The performance of companies in the midcap IT segment was diverse, unlike the case with large-cap companies, where the numbers were generally muted and disappointing. LTI Mindtree and Mphasis underperformed, with the latter being impacted by their large BFSI portfolio, while the former is a much larger company than Coforge and Persistent Systems.
The IT earnings season for the fourth quarter of the financial year gone by (FY23) has ended with disappointment. The street had expected a muted quarter but the eventual reading was worse than anticipated just a month ago. The best-case scenario was that IT companies would meet their estimates, but three out of the five large-cap companies experienced a decline in their revenues.
TCS was the best performer with revenue growth of only 0.6 percent, while mid-cap technology companies like Coforge, Persistent Systems, Cyient, L&T Tech, and KPIT Tech fared better, mostly meeting their estimates and being rewarded by investors.
The performance of companies in the midcap IT segment was diverse, unlike the case with large-cap companies, where the numbers were generally muted and disappointing. LTI Mindtree and Mphasis underperformed, with the latter being impacted by their large BFSI portfolio, while the former is a much larger company than Coforge and Persistent Systems.
Midcap companies have provided more optimistic revenue guidance than their large-cap counterparts. While large-cap companies like Infosys and HCLTech expect mid to high single-digit revenue growth, midcaps are projecting double-digit revenue growth, with Coforge expecting 13 to 16 percent, Cyient anticipating 15 to 20 percent, and LTI Mindtree predicting double-digit growth in FY24, despite its subdued Q4 performance.
There has been a lacklustre margin performance across the board, whether in large-cap or mid-cap companies. This has raised concerns about whether we will see margin expansion in FY24.
Previously, the narrative was that even if the top line faltered, margins and EPS would do well due to the diminishing supply-side problem. However, in Q4, margins have been subdued.
In terms of stock price performance, large-caps have not fared well, with TCS down 10 percent in the last year and Infosys down nearly 20 percent.
Conversely, mid-cap companies that have performed well in terms of earnings have been rewarded by the stock market. For example, Cyient has seen a rise of 30 percent in the last year and Persistent has gained about 10 percent. This summarizes the earnings guidance for FY24 and the current state of stock prices.
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