Systematix Institutional Equities has released its latest ratings and outlook for several prominent Indian IT service companies, highlighting a period of modest growth influenced by global economic factors and evolving client demands.
According to the brokerage, Tier-I IT firms experienced revenue growth in the June quarter ranging from a 1.2 percent decline to a 2.6 percent sequential increase in constant currency terms. This varied performance was attributed to client-specific challenges, delays in deal implementations, and a challenging macroeconomic environment.
Key Ratings for Large-Cap IT Stocks
Systematix has assigned 'HOLD' ratings to several major players in the large-cap segment:
- Tata Consultancy Services Ltd (TCS): Rated 'HOLD' with a target price of Rs 2,350.
- Infosys Ltd: Also maintained at 'HOLD' with a target price of Rs 1,150.
- Wipro Ltd: Given a 'HOLD' rating, targeting Rs 170.
- HCLTechnologies Ltd: Carries a 'HOLD' rating, with a target price of Rs 1,180.
Despite the growth headwinds, the brokerage noted that profitability across these companies remained resilient. This was largely supported by proactive cost management strategies and favorable currency movements, which helped offset the impact of weak operating leverage and ongoing investments.
Positive Outlooks and Specific Calls
While many large-cap firms received 'HOLD' ratings, Systematix expressed a more positive view on certain companies:
- Tech Mahindra Ltd: Assigned a 'BUY' rating, with an optimistic target price of Rs 1,740.
- R Systems International Ltd: Also received a 'BUY' rating, targeting Rs 300.
In contrast, Sonata Software Ltd was given a 'SELL' rating, with a target price of Rs 260, indicating a less favorable outlook from the brokerage.
Market Trends and Mid-Cap Preferences
Systematix highlighted that deal wins across both Tier-I and mid-cap IT companies showed a mixed trend. Demand was primarily focused on initiatives aimed at cost reduction, vendor consolidation, and the establishment of global capability centers (GCCs).
The brokerage also emphasized that substantial investments in artificial intelligence (AI) and the increasing client demand for productivity gains are expected to contribute to modest growth trajectories in the near to medium term for the sector.
Within the mid-cap IT segment, Systematix identified Coforge as its preferred pick, citing the company's market share gains, continuous capability building, and healthy deal wins. However, the brokerage did not provide a specific rating or target price for Coforge in this report.