Shares of IT companies TCS, HCL Technologies, and Wipro surged up to 2 percent on April 3 after global brokerage firm CLSA raised its target prices despite an uncertain macro setup. The firm believes that the IT firms will guide conservatively going ahead, and hence kept the outlook unchanged for key verticals like banking, retail, hi-tech, and telecom.
So far this year, shares of TCS, HCL Tech, and Wipro have rallied up to 4 percent, whereas Tech Mahindra has declined over 2 percent. In comparison, Nifty IT index slipped 0.8 percent during the same period.
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Analysts at CLSA have upgraded TCS to 'underperform' from 'sell' and hiked the target price to Rs 4,043 per share from Rs 3,925 apiece. Similarly, HCL Tech was upgraded to 'underperform' from 'sell' and the target price was raised to Rs 1,553 per share from Rs 1,536 apiece. Additionally, Wipro's target price was raised to Rs 445 from Rs 441 per share as CLSA maintained a 'sell' position.
"We expect TCS among large Indian IT firms to top the charts in terms of constant currency sequential growth. Infosys, too, has entered a strong growth phase with few large deal ramp-ups planned for Q1," the brokerage firm added.
Meanwhile, CLSA analysts upgraded Tech Mahindra to 'buy' from 'underperform' but cut its target price to Rs 1,508 per share from Rs 1,508 per share. Infosys target price, too, was cut to Rs 1,508 per share from Rs 1,518 but they maintained a 'outperform' rating on the counter.
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Given the delay in the discretionary demand revival, the brokerage has cut earnings per share (EPS) estimates by up to 11 percent over FY24–26CL.
On the other hand, analysts at Kotak Institutional Equities shared Infosys, TCS, and Cyient as their preferred picks. "TCS should lead growth in FY2025E, followed by HCL Technologies. Infosys should underperform on growth among the three in FY2025E, given its higher discretionary exposure. We expect a recovery in growth rates in FY2026 as discretionary spending likely improves," they said.
Kotak has cut FY2024-26E dollar revenue estimates across IT services companies by 0-3 percent and EBIT margins by 10-50 bps for select companies, leading to a 1-4 percent EPS cut.
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