The sectoral-indice Nifty IT rose almost 4% today to 37,929.30 points. Shares of Wipro led the gains and rose 10% to hit the upper circuit of Rs 511.95. Shares of HCL Technologies rose around 5% to hit a new 52-week high of Rs 1,619.80. Here are some of the brokerage firms’ views on the stocks
Wipro
Motilal Oswal expects Wipro’s revenue growth to be the slowest among Tier-1 IT Services peers and also believes the margin to be below the management’s expectation of a medium-term range of 17% to 17.5%. The brokerage house has a price target of Rs 520 on the company’s scrip.
The brokerage has a “Neutral” rating on the stock as it awaits “further evidence of the execution of Wipro’s strategy” and “a successful turnaround from its struggles over the last decade before turning more constructive on the stock.”
Motilal Oswal believes the company to deliver a 3.9% compounded annual growth rate in the services revenue between FY23 and FY26.
Another firm JM Financial said, “Wipro’s Q3FY24 performance suggests inflection.” The company’s consulting business, CAPCO, saw double-digit booking growth. The brokerage house expects this is the “first quantitative sign of rebound in discretionary spend.” The brokerage’s estimate for earnings per share of the company of 16% for FY24-26 is the highest among its top four peers.
According to the brokerage, “Q4 guided growth band for both have converged, which should narrow the valuation gap.” The brokerage house has raised the target price marginally to Rs 550 from Rs 500 and has kept the “Buy” rating unchanged on the stock.
HCL Technologies
The brokerage house kept the rating unchanged at “Buy” on the stock of HCL Technologies, with a target price of Rs 1,880. Motilal Oswal believes the company to “emerge stronger” due to its capabilities in the IMS and digital space, and also due to investments in the Cloud.
The brokerage house has raised the earnings per share estimates for FY 23 to FY 26 by 3% – 4% on the back of strong third-quarter results.
The company is the brokerage’s top pick among IT services companies.
Motilal Oswal sees the company to “deliver an FY24 dollar (constant currency) revenue growth at the midpoint of its guidance, which should help it report a revenue CAGR of 9.8% over FY23-26.” This can lead the company’s net profit to 12.7% CAGR between FY23 and FY 26.
“HCL Technologies is expected to maintain its revenue guidance for FY24 in the 5–6% growth range and keep its margin guidance stable at 20–24%. These results and projections indicate a solid footing for the company in the upcoming quarter, which could positively influence the stock’s performance,” said Anirudh Garg, partner and fund manager at Invasset.
“HCL Technologies’ guidance for FY24 indicates a narrowed revenue growth of 5-5.5% CC and an EBITM (operating margin) target of 18-19%, reflecting a cautiously optimistic outlook for the upcoming quarters,” said Sonam Srivastava, founder and fund manager at Wright Research.
