Emkay advises to buy these IT stocks; Rating of Upgrade TCS, Mphasis

Tier-II companies outperformed Tier-I peers in sequential revenue growth as well as margin expansion. NS IT companiesMargin expansion was supported by revenue growth-led operating leverage, offshore turnaround and productivity improvements, which address wage inflation and supply-side challenges.

The brokerage house has upgraded TCS (Target Price: 4,100) and Mphasis (TP: 3,730) Buy considering the recent underperformance of the stock. Its pecking order is Infosys (TP: 2,100), Tech Mahindra (TP: 1,930), HCL Technologies (TP: 1,420) and in TCS Tier-1 names, and Persistent Systems (TP: 5,000), FirstSource (TP: 230), Mphasis and Birlasoft (TP: 550) in mid cap.

Meanwhile Emkay has a hold rating on Wipro (TP: 700), LTI (TP: 6,650), Mindtree (TP: 4,450), and Coforge (TP: 5,400).

The brokerage expects IT spending across all verticals to remain strong, driven by continued growth in demand for cloud, data analytics, digital transformation, cyber security and AI. It also expects the revenue momentum seen in H1 to continue throughout FY22, led by secular broad-based demand trends and healthy deal wins.

“Tier-1 IT companies, except HCL Tech, reported flat margins sequentially. HCLT’s margin QoQ was down 60bps due to weakness in the products business. For Tier-II firms, margin performance remained resilient despite supply-side challenges. We believe margins are likely to remain stable in FY22 despite supply issues in the form of strong revenue growth-led operating leverage, employee pyramid rationalization, higher offshoring and higher pricing,” notes Emkay. stated in.

The views and recommendations given above are those of individual analysts or broking companies and not of Mint.