CLSA expects GenAI to drive Indian IT's potential growth; TCS and Persistent Systems among top picks

CLSA has set a target price of Rs 9,267 for Persistent Systems calling it a 'high-conviction outperform' stock, while for TCS, it has set a target price of Rs 4,546 rating it as 'outperform'.

CLSA released its outlook on its top preferences in the Indian IT sector, with Persistent Systems being termed as a 'high-conviction outperform' stock and TCS's review as 'outperform'.

As per CNBC-TV 18, CLSA has set a target price of Rs 9,267 for Persistent Systems with a potential upside of 79 percent from Monday's closing price (Rs 5,150). Meanwhile for TCS, CLSA set a target price of Rs 4,546, reflecting a potential upside of 27 percent from Monday's close (at Rs 3,589).

As of 1 pm on March 11, the shares of Persistent Systems  were trading at Rs 5,218.40, a gain of a percent while TCS shares were trading at Rs 3,564, a decline of 0.68 percent.

As per CLSA, across the IT sector, Generative Artificial intelligence (AI) has immense potential to bring a shift in human lives. It will be the reason behind new-age tech cycle, allowing Indian IT services firms to make use of.

CLSA further believes that data cloud, cybersecurity, SaaS and automation will drive the sector towards growth ahead, the basis of this reasoning being a proprietary framework that evaluates total addressable market, revenue, productivity gains, use cases and implementation.

In its Q3FY25 earnings, Persistent Systems recorded 15 percent (sequential basis) increase in its consolidated net profit, taking it to Rs 372.99 crore. On a year-on-year basis, it reflected a 30 percent rise. Meanwhile, its revenue grew 6 percent on a quarter-on-quarter basis, while it reflected 23 percent growth year-over. Thus, taking it to Rs 3,062.3 crore.

Tata Consultancy Services' (TCS) quarter ending December, for the current fiscal year, showcased 12 percent rise in its consolidated net profit to reach Rs 2,380 crore. Last year's corresponding quarter saw its consolidated net profit at Rs 11,058 crore. Its revenue for the quarter stood at Rs 63,973 crore, which was at a growth of 5 percent year-on-year.