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Q4 Result Shows High Expectation for IT Stocks

08 June 20236 mins read by Angel One
Q4 Result Shows High Expectation for IT Stocks
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Experts believe these IT stocks will stay on top after analysing their performance in the first half of FY 2022. Further, they have the full potential to steal the limelight in the stock market.

Read till the end to learn about the performance of IT stocks in detail!

Analysis That Shows Positive Performance of IT Stocks

As of the second half of FY 2022, the return of the Nifty IT index matched the market. However, in the first half, the index recorded strong outperformance. Brokerage firms said that their key to maintaining the current valuation for IT stocks is their stable margin and revenue growth momentum.

Further, experts expect them to show strong performance in the future by analysing the signal put out by the best IT stocks on its recent result by Ireland-based Accenture along with its revised outlook.

In the result season coming up shortly, interested investors can find details on client budgets, demand updates, subcontracting expenses and attrition trends.

Motilal Oswal Financial Services Limited says that Tier-I companies should show a revenue growth ranging between 2.8 to 5.1% sequentially. Also, this growth should be on a constant currency basis. However, it does not apply to HCL Technologies as its products are seasonal. While as for Tier-II IT companies, brokerage firms expect a growth ranging from 2.5% to 8%.

Details of IT Stocks Growth Estimation for FY 2023

As per the expectation of Edelweiss Broking Limited, companies should show the following growth:

Company CC Growth Dollar Growth
Infosys 4.3% 4%
Wipro 4.3% 4%
TCS 3.3% 3%
HCL Technologies 2.8% 2.5%
Tech Mahindra 5% 4.5%

Emkay Global Financial Services Ltd. also shared its analysis of the performance of top IT stocks QoQ basis. This figure, along with the EBIT margin, is mentioned below:

Company QoQ Growth EBIT Margin
TCS 2.3% (8.1% YoY) to Rs. 9,993.90 crores 25.1%
Infosys 3.5% (18.4% YoY) to Rs. 6,010 crores 23.5%
Wipro 3.2% (3.1 YoY) at Rs. 3,064.60 crores 17.5%
HCL Technologies 3.4% degrowth (up 39.3% YoY) at Rs. 3,325.80 crores 18.1%
Tech Mahindra 3.7% (31.2% YoY) to Rs. 1,418 crores 14.3%

Emkay Global Financial Services Ltd. expects Infosys to record a CC revenue growth of 12% to 15% YoY for the financial year 2023, along with an EBIT margin ranging from 22% to 24%. On the other hand, HCL Tech must guide a double-digit growth in its revenue while reducing the EBIT margin expectation of 18% to 20%. As for Wipro, it may show 2% to 4% CC revenue growth QoQ for the quarter of June. However, there is no guidance as such for TCS.

Information Available on Pecking Order

Edelweiss Broking Limited has different preferences for small caps, large caps and mid-caps IT stocks. Under large caps, it includes HCL, Infosys, and TCS, while for mid-caps, it is Mindtree Ltd, Coforge, and Larsen & Toubro Infotech Limited. However, it is Birlasoft, Zensar Technologies Limited, and Firstsource Solutions Limited for small caps.

On the other hand, Emkay Global Financial Services Ltd.’s pecking order would be the large-cap IT stock of Infosys. After that comes the HCL Tech, Wipro, Tech Mahindra, and then TCS shares. Finally, under the midcap basket, it prefers stocks of Birlasoft, Mphasis Limited, eClerx Services Ltd., Route Mobile, Persistent Solution and Firstsource Solutions Limited.

However, Motilal Oswal Financial Services Limited prefers stocks of Tier-I companies above Tier-II because of their attractive relative valuation and potential to narrow down valuation differences with time.

Bottom Line

Investors looking forward to investing in the top IT stocks can go through the above analysis and information for a better decision. These stocks are expected to perform better as per market research, but investors must carry the necessary valuation before investing.

Also, if you are investing for the first time, the Angel One platform offers a simple way to open a Demat Account for easy financing. So, one can sign up without much documentation and effort.

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Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.

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