Q2 Results Watch: Satyam net seen down 16%

Indian software services companies are likely to show healthy numbers for the quarter ended September 2006 on account of the current strength in demand for offshore services.

According to a research report issued by JM Morgan Stanley, volume growth should remain strong and margins for most companies should expand given that wage increases and visa charges were incurred in the June quarter.

"Infosys Technologies is expecting strong growth with Q/Q revenue growth of 9.2% and 44% YoY basis. Operating profit is expected to grow 12.8% Q/Q and 38% YoY, and net profit is likely to move up by 5.8% Q/Q and 38% YoY.

"TCS is likely to witness continuing momentum after 3 quarters of 8% QoQ revenue growth. For the September quarter, revenue is expected to grow 7% (40% YoY), operating profit at 14.6% (30% YoY) and net profit at 8.1% (35% YoY).

"Wipro is likely to witness better quarter after registering low volume growth in the past compared to peers due to client issues. For September quarter, Wipro's revenue growth is expected to be 8.5% (41% YoY), operating profit at 7.3% (41% YoY) and net profit 5.4% (37%).

"Satyam Computer could be the lame duck among its peers with revenue growth expected to be 7.6% Q/Q (35% YoY). Operating profit should decline due to wage increases from July 20007 to 2.4% Q/Q (up 30% YoY), and net profit is expected to be down 15.9% Q/Q (up 26% YoY)," the report said.

Sep-06: Earnings Estimates and Key Factors
Company (Rs mn)	Sep-05	Jun-06	Sep-06E	QoQ	YoY	Magmt Guidance
INFOSYS
Revenue	22940	30150	32933	9.20%	44%	32800
OP	6370	7800	8798	12.80%	38%	-
OPM (%)	27.8	25.9	26.7	85 bps	-105  bps	-
Net Income	6060	7940	8357	5.30%	38%	8232
TCS
Revenue	31566	41443	44335	7.00%	40%	-
OP	8169	9265	10621	14.60%	30%	-
OPM (%)	25.9	22.4	24	160 bps	-192  bps	-
Net Income	6903	8626	9322	8.10%	35%	-
WIPRO
Revenue	18876	24513	26588	8.50%	41%	26773
OP	4500	5911	6340	7.30%	41%	-
OPM (%)	23.8	24.1	23.8	-27 bps	1 bps	-
Net Income	4704	6103	6432	5.40%	37%	-
SATYAM
Revenue	11550	14429	15531	7.60%	35%	15290
OP	2417	3188	3111	-2.40%	29%	-
OPM (%)	20.9	22.1	20	-207 bps	-89  bps	-
Net Income	2373	3541	2979	-15.90%	26%	2889
HCL TECH
Revenue ($ mn)	221	272	289	6.10%	31%	-
OP ($ mn)	39	49	49	-0.50%	25%	-
OPM (%)	17.6	18	16.8	-113  bps	- 78 bps	-
Net Income ($ mn)	38	51	49	-3.70%	28%	-
Note: Wipro management guidance is translated to INR using Morgan Stanley's estimates for the exchange rate.