- Cyient: IDBI Capital maintains its ‘Buy’ rating on this IT Consulting & Software company with a target price of Rs 1,045. This implies an upside of 19.6%. In Q3FY23, the firm’s net profit surged 97.2% QoQ to Rs 156 crore and revenue grew 15.9% QoQ.
Analysts Devang Bhatt and Dhawal Doshi expect the services segment’s revenue to grow 25% YoY in FY23 on the back of organic and inorganic levers. They anticipate “it to be driven by double-digit growth in aerospace, communication, medical, mining, automotive and healthcare business verticals”. The analysts also expect the firm’s cost realisation initiatives to expand margins further in the coming quarters.
However, Bhatt and Doshi believe Cyient’s margin in FY23 will be impacted by the one-offs in litigation and acquisition-related charges. But they expect the margins in FY24 and FY25 to improve due to the absence of one-off costs and easing of supply-side challenges. The analysts anticipate the IT firm’s revenue to grow at a CAGR of 19.9% over FY22-25.
- Wipro: ICICI Direct upgrades its rating to a ‘Buy’ from ‘Hold on this software services company with a target price of Rs 455. This indicates an upside of 12.9%. In Q3FY23, the company reported a 14.8% QoQ growth in net profit to Rs 3,052.9 crore, while its revenue grew by 3.6% QoQ to Rs 23,867.3 crore. According to analysts Sameer Pardikar and Sujay Chavan, “Wipro reported weak Q3 results on the revenue front.”
The total contract value for the quarter was $4.3 billion. The analysts think that sustainability of the same in the subsequent quarters will likely provide revenue visibility for FY24. They also believe that Wipro’s decision to change leadership in areas of America, West Asia, Japan and Australia will provide a stimulus to revenue growth in the regions. Pardikar and Chavan remain optimistic about the stock on the back of higher penetration in Europe, client mining and acquisition of new logos.
- Infosys: HDFC Securities maintains a ‘Buy’ call on this big-4 IT company with a target price of Rs 1,815, indicating an upside of 18.9%. In Q3FY23, Infosys’ profit grew by 9.4% QoQ to Rs 6,586 crore and its revenue increased by 5.3% to Rs 39,087 crore. Analysts Apurva Prasad, Amit Chandra and Vinesh Vala said that revenue growth was ahead of consensus, supported by higher pass-through revenue, which was linked to integrated deals. The IT company has increased its revenue guidance for Q4FY23 to 16-16.5%.
The total contract value for Q3FY23 was $3.3 billion. The analysts are also positive about the company as they expect a recovery in North America and strong traction in the energy & utilities, and manufacturing verticals. Out of the 32 large deals that Infosys won, 25 were from North America. “Acceleration in vendor consolidation and cost take-out deals has led to growth in its core services (vs historical decline),” they added.
- Just Dial: ICICI Securities maintains its ‘Buy’ rating on this internet technology company with a target price of Rs 750. This indicates an upside of 14.2%. In Q3FY23, the firm’s net profit grew 44.4% QoQ to Rs 75.3 crore, and revenue rose by 7.9% QoQ.
Analysts Abhisek Banerjee and Heenal Gada believe the stock is trading at an attractive valuation after falling nearly 34% over the past year. They believe this correction in price is an overreaction and are positive on the company as it has beaten their EBIT margin estimates in Q3. Its margin expanded by 400 bps QoQ to 12.3%, beating the analysts’ estimate of 9.4%.
Banerjee and Gada believe the sustained and sequential improvement in collections indicates an improvement in demand for the firm’s services. They add, “Just Dial has ~26% revenue exposure to the B2B e-commerce segment. We believe this is likely to be the primary growth driver for the company going forward.” The analysts expect the company’s net profit to grow at a CAGR of 100.8% over FY23-25. However, the company’s Trendlyne Durability Score is 45, indicating average financial health - the company has negative net cash flow and weak ROE.
- HCL Technologies: Motilal Oswal reiterates its ‘Buy’ rating on this technology company with a target price of Rs 1,270, indicating an upside of 14.6%. For Q3FY23, the company reported a profit of Rs 4,096 crore, a 17.4% QoQ increase, and revenue of Rs 26,960 crore (in line with the brokerage’s estimate), an 8.2% QoQ rise. Analysts Mukul Garg, Prakash Bhanushali and Pritesh Thakkar said, “Strong revenue growth guidance of 16-16.5% YoY in CC terms for services should address investor concerns on the company’s growth.”
“Despite seasonality and a tough demand environment, HCL maintained its growth momentum in both IT Services, and engineering research and development verticals,” the analysts added. They believe higher exposure to cloud offers a better resilience to its portfolio in the current context, with higher demand for cloud, network, security, and digital workplace services.
Remaining optimistic, analysts said, “Strong sequential growth within services, robust headcount addition, healthy deal wins, and a solid pipeline indicate an improved outlook.”
Note: These recommendations are from various analysts and are not recommendations by Trendlyne.
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