Information technology shares outperformed benchmark indices in the past three months. The BSE IT index jumped 4.19 per cent to 11,125.58 on October 19 from 10,678 on July 17. The BSE Sensex slid 3.86 per cent during the same period.
During July 17 and October 19, share price of Vakrangee slid the most — 17.10 per cent, followed by HCL Technologies (10.32 per cent) and Tata Consultancy Services (2.83 per cent). On the other hand, share price price of Mindtree and Infosys surged 14.28 per cent and 11 per cent, respectively. As of now, IT majors like Infosys, HCL Technologies, Tata Consultancy Services and Mindtree have announced their earnings for the quarter ended September 30, 2015.
Various brokerage houses are bullish on Infosys, HCL Tech, TCS and Mindtree. We take a look at why these analysts are betting upon the shares of these 4 IT majors.
HCL Technologies: For the quarter ended September 2015, the IT major posted consolidated net profit of Rs 1,823 crore, down 2.67 per cent, against Rs 1,873 crore in the corresponding quarter a year ago.
Sharekhan in a research note said, “On account of weak Q1 and currency reset to Rs 65-64, we have revised our earnings estimates marginally for 2015-16 and 2016-17.”
In the past one month the share price of HCL Technologies has corrected around 10 per cent. Sharekhan said, “At the current level of 13.7x its FY2017E, the stock looks attractive (lowest among top-five IT companies). We expect revenues and margins to recover in the coming quarters, with the execution of large integrated deals in the IMS space. We maintain our ‘Buy’ rating on the stock with a revised price target of Rs 980.”
Infosys: Infosys, India’s second-biggest software exporter, on October 12 reported a 9.8 per cent rise in September quarter consolidated net profit, but gave a lower dollar revenue guidance for the current fiscal.
According to Prabhudas Lilladher, Infosys’ Q2FY16 performance was comprehensively ahead of expectation with solid revenue and margin beat. Growth has been strong across verticals and geographies. Infosys’ initiatives in automation/innovation etc. are showing signs of early success. Healthy deal win (US$ 980mn), new client additions and improvement in client matrix indicate improvement in overall performance. However, despite a solid Q2, company has maintained its FY16 CC guidance (10‐12% YoY) and lowered USD guidance (6.4‐8.4%). Company has attributed lower number of working days and furloughs for the cautious 2HFY16 outlook. Based on the underlying business momentum and past impact of seasonality, the brokerage house believes that Infosys has been conservative in guidance and expect company to beat 2015-16 revenue guidance. Prabhudas Lilladher expects the share price of the company can touch Rs 1440 in the next few quarters.
Tata Consultancy Services: TCS on October 13 met market expectations with an over 16 per cent rise in net profit at Rs 6,084.66 crore for the quarter to September, backed by strong performance of its digital platform and recovery in Latin America and the home market. Tata Consultancy Services’ (TCS) order book grew 30 per cent in the quarter, the highest ever for the company, giving the indication that things are looking good, managing director and chief executive N Chandrasekaran told reporters.
Angel Broking in a research note said, “For 2QFY2016, TCS’ results have come in slightly below our expectations on the sales and net profit fronts, while EBIT margins have come in in line with our expectations. We maintain our ‘Buy’ rating on the stock with a target price of Rs 3,165.”
Mindtree: IT firm Mindtree posted 15.1 per cent rise in net profit at Rs 158.2 crore for the second quarter ended September 30, 2015-16. The mid-sized firm had posted net profit of Rs 137.4 crore in the July-September quarter of the 2014-15 fiscal. Its revenue increased 31.6 per cent to Rs 1,169.3 crore for the second quarter, from Rs 888.6 crore in the year-ago period.
Prabhudas Lillaher in a research report said, “Mindtree is ahead of the peer group in investing in digital business and this we believe will sustain higher revenue growth. The share price of the company can touch Rs 1,540 going forward.”
(Disclaimer: The stocks are recommended by the respective brokerage houses and not a recommendation from Financial Express online)