2 hrs ago
HDFC Securities Names IT Stocks Ahead of Q2 Results
HDFC Securities shared its views on Indian technology companies before their next earnings reports.
It expects many large IT companies to grow slowly in the second quarter of FY27.
Mid-sized companies may do somewhat better, partly because of acquisitions.
The brokerage says customers are taking longer to approve projects and are spending less on optional technology work.
It also says customers want some of the savings from AI productivity to come through as lower prices.
Even with these concerns, HDFC Securities sees some stocks as attractive at current prices.
It gave target prices and ratings for several companies, including Mphasis and L&T Technology Services.
The article says the sector’s recovery depends heavily on stronger business in the second half of the financial year.
HDFC Securities retained positive ratings on several Indian IT stocks ahead of FY27 second-quarter results.
Its listed targets include ₹2,470 for TCS, ₹1,250 for Infosys and ₹5,270 for L&T Technology Services.
Mphasis has a ₹2,840 target, implying 32% upside; Persistent Systems has a ₹6,070 target, implying 15% upside.
The brokerage expects sequential growth of -0.4% to 2% for large IT firms and 0.6% to 6.3% for mid-sized firms.
It cited weak deal activity, delayed client decisions, lower discretionary spending and AI-related pricing pressure, while noting low valuations and attractive free cash flow yields.
- Who
- HDFC Securities and Indian IT companies covered in its report.
- What
- The brokerage shared stock ratings and target prices and forecast weak sequential sector growth for Q2 FY27.
- Where
- India.
- When
- Ahead of the second-quarter FY27 earnings season.
- Why
- The brokerage cited weak deal activity, delayed client decisions, reduced discretionary technology spending and AI-related pricing pressure.
Near-term risks
Reasons for optimism
Growth and business conditions
Near-term risks
HDFC Securities expects weak near-term growth, citing weaker deals, slower client decisions, spending cuts and pricing pressure tied to AI productivity.
Reasons for optimism
The brokerage maintained a positive stance on most of the stocks it covered and identified potential upside in several targets.
Valuations and recovery
Near-term risks
A weaker first half and seasonal furloughs in the third quarter could constrain FY27 growth.
Reasons for optimism
HDFC Securities said valuations were near historical lows and free cash flow yields remained attractive; the sector’s recovery could depend on the second half.
Key facts
- Large IT sequential growth estimate
- -0.4% to 2%
- Mid-sized IT sequential growth estimate
- 0.6% to 6.3%, partly helped by acquisitions
- Mphasis target and implied upside
- ₹2,840; 32%
- L&T Technology Services target and implied upside
- ₹5,270; 30%
- Infosys target and implied upside
- ₹1,250; 26%
- TCS target and implied upside
- ₹2,470; 20%
- Estimate revisions
- FY27–FY29 revenue estimates reduced by around 0.4%–0.6%; valuation multiples lowered by 1–2 times for some stocks.
Quotes
HDFC Securities
Brokerage firm commenting on the IT sector outlook and its valuation estimates
“Despite weak near-term growth, valuations have fallen close to historical lows and free cash flow yields remain attractive. The brokerage has therefore reduced its revenue estimates for FY27-FY29 by around 0.4-0.6%, lowered valuation multiples by 1-2 times for some stocks, and shifted its valuation base to September 2028 earnings.”
livemint.com
Sources
Related news
Citi Sees Continued Pain for Indian IT Stocks
BoB Capital Cuts IT Stock Targets Amid AI Disruption Risks
Brokerage names IT stock picks after Accenture results
Nirmal Bang Flags AI Pressure, Sets IT Stock Targets
Indian IT stocks rally as rupee weakens; Q2 outlook varies
Kotak Names Tech Mahindra, Coforge, Sagility, Indegene Top IT Picks
Branch Closing or Shifting? What Bank Customers Should Know
Dongre Recommends HDFC Bank, Infosys and BEL Shares
Indian IT Firms Face Another Muted Quarter Amid Uncertainty
Jefferies Names HDFC Bank Top Pick After CEO Appointment
