
As the result season goes on in full swing two smallcap IT companies- Birlasoft and Happiest Mind Technologies are set to announce their quarterly earnings on Monday. Akin to other IT players, analysts are not expecting any positive surprises from them either.
Analysts believe that their constant currency (CC) revenue may take a hit, bit favourable conversion rate may balloon revenue in Indian currency. Their EBITDA, EBIT margins and Profit after Tax (PAT) are most likely to remain under pressure on both year-on-year (YoY) and quarter-on-quarter (QoQ) comparisons. Growth, if any, would not be a major booster. Nuvama Institutional Equities pegs Birlasoft's revenue at Rs 1,207.6 crore, dropping over a per cent QoQ but up 9.6 per cent YoY. It sees EBIT at Rs 122 crore, down 11.2 per cent QoQ and 21.2 per cent YoY, while EBIT margins are seen at 10.1 per cent, about 400 bps down YoY. PAT is likely to be at Rs 99.3 crore, down 26.3 per cent QoQ and 25.3 per cent YoY, said Nuvama. "Revenue is expected to decline 1.5 per cent QoQ in CC terms and 1 per cent QoQ in the US dollar terms. Revenue declined to be driven by the bankruptcy of Invacare. Margin is expected to decline 100bps QoQ due to Invacare servicing. Ex-Invacare, margins are expected to expand 100bps. We would keenly watch out for management commentary on the status of invacare bankruptcy and update on management," it said. Birlasoft is expected to report 1.1 per cent CC revenue decline partially with a likely 30 bps cross currency tailwind resulting in reported US dollar revenue decline of 0.8 per cent QoQ. Decline in revenue as no revenue to come from Invacare. Company is expected to report an EBIT margin at 9.8 per cent, said ShareKhan. B&K Securities sees Birlasoft's revenues at Rs 1,239.3 crore, marginally up QoQ and 12.5 per cent higher YoY, while its EBITDA is seen at Rs 161.1 crore, down about 8 per cent YoY. ITS PAT is seen at Rs 111.2 crore, down 16.3 per cent YoY. The revenue growth is expected to be muted owing to the macroeconomic headwinds, said B&K. "Birlasoft's ERP business has still higher project dependence that impacted performance in 3QFY23. Management does not expect ERP to slow down from hereon as digital and annuity of ERP should grow." "The management mentioned that the margins in 3QFY23 were impacted due to the one-time cost but is confident to report margin expansion on QoQ basis in 4QFY23. The company will continue to make necessary investments to drive future growth, which might affect the margin in the near-term. The management also mentioned that they aspire to achieve a 15 per cent EBITDA margin in the near to medium-term and 18per cent in the long-term, it added. While on the other hand, Happiest Minds Technologies is also not likely to report a strong performance in the March 2023 quarter. Not many brokerage firms have their view on the counter. Anand Rathi expects Happiest Minds to report net sales of Rs 384 crore, up 4.7 per cent QoQ and 27.8 per cent YoY. Its EBITDA is seen at Rs 88.5 crore, slightly down QoQ, while up 23.5 per cent YoY with a EBITDA margin falling up to 134 bps to 23 per cent. Net profit is seen at Rs 58.7 crore with a profit margin of 15.3 per cent. In comparison to peers, niche smaller companies go slow and Happiest Minds is not an exception. Q4 also reflects seasonality, said Anand Rathi's report. The exceptions are those which are seeing late recovery or sustaining high growth, and Happiest Minds is one of them, it added. For the entire financial year 2022-23, YES Securities in its March 2023 report, expects Happiest Minds to report a net revenue of Rs 1,439.3 crore, up 31.6 per cent YoY. It pegs Happiest EBITDA at Rs 357.5 crore, up 38.3 per cent YoY, while profit for the entire year is seen at Rs 243.9 crore, 30.2 per cent higher than the previous fiscal. The brokerage cited six reasons including strong revenue growth, robust EBIT margins, outstanding business performance, diversified revenue mix, sound promoter background and positive outlook as the key reasons to buy the stock in its maiden report on it.