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Expect a moderate acceleration in growth for Tier-I IT in FY14, says Nomura

 

Oracle’s license sales growth is an early indicator of a pick-up in discretionary spending for IT services companies, says Nomura Equity Research in its Quick Note
 
“We continue to expect a moderate acceleration in growth for Tier-I IT (Information Technology) in FY14 (versus FY13). Our Tier-I IT stock preferences among ‘Buys’ are HCL Technologies, followed by Wipro and Cognizant, and among ‘Neutrals’ we prefer Infosys over Tata Consultancy Services,” Nomura Equity Research said in its Quick Note. 
 
Oracle Corporation’s license sales growth is an early indicator of a pick-up in discretionary spending for IT services companies, and the muted performance (-2% year-on-year and flat in constant currency) in 3Q (third quarter) could temper exuberance in street expectations for IT services companies. This according to Nomura analysts, is after the third quarter results announcement of Oracle Corporation. Its shares were down 8% in after-market trading in America. This result miss, according to Thomson Reuters, is their worst miss in revenues since November 2011.
 
Nomura analyst Rick Sherlund (based in the US), in his First Look note on Oracle Corporation results, made the following observations:
 
(a) License revenue came in at $2.338 billion (-2% year-on-year, 0% constant currency), below the guidance range of +3%-13%;
 
(b)  Hardware products revenue was $671 million (-23% year-on-year, -22% constant currency), which is another in a long string of hardware disappointments;
 
(c) EPS (Earnings per share) of $0.65 was below Nomura’s estimates of $0.68 on lower-than-expected revenues as well as a lower-than-expected operating margin of 46.6%.
 
Oracle Financial Services Software (in India) was trading at Rs2,600, down 2.85%, on the Bombay Stock Exchange.
 
According to Oracle Corporation (US) management’s guidance and commentary for future performance:
 
(a) Oracle has guided for 1%-11% year-on-year growth in license revenues for the next quarter and a fall of 12%-22% year-on-year in hardware.  
 
(b) Oracle attributed the miss in revenues to lack of urgency in sales force execution which has led to many 3Q (third quarter) deals falling into 4Q (fourth quarter). 
 
(c) Oracle mentioned in the results conference call that the pipeline growth is encouraging but they still have been conservative with the 4Q (fourth quarter) guidance. 
 

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Indian pharma market records 7.7% y-o-y growth in net sales February

 

The slowdown in net sales growth has been a result of uncertainties surrounding the pending pharma pricing policy, lack of investment in sales force and regulatory delays in obtaining new product approvals in India, says Nomura Equity Research on the Indian pharmaceuticals market
 
The Indian pharmaceuticals market (IPM) is a secular growth story, with market growth led by new product introductions and volume growth driven by increasing penetration and better access to healthcare. As per AIOCD (All Indian Origin Chemists & Distributors) data, IPM registered net sales growth of 7.7% year-on-year in February 2013 after growing 10%+ in January 2013. For the quarter ended December 2012, IPM net sales growth came in at 9.1% year-on-year, as per AIOCD data. Nomura Equity Research notes that 3QFY13 was the first occasion where IPM net sales growth fell below 10% year-on-year (since April 2007).
 
As per the industry, the slowdown in growth has been a result of uncertainties surrounding the pending pharma pricing policy, lack of investment in sales force and regulatory delays in obtaining new product approvals in India, observe Nomura analysts. 
 
Nomura reports that Zydus Cadila (ex-Biochem) (26.2%), Sun Pharma (14.8%), Lupin (11.6%), Glenmark (10.3%) and Cipla (9%) posted higher year-on-year net sales growth than the overall IPM in February 2013. There has been slower growth for Glaxo (0.4%), Ranbaxy (5.5%) and Dr. Reddy’s (1%).
 

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