IT Services Q1 Results Preview - More Of The Same Is Good News: HDFC Securities

HDFC Securities Institutional Equities

We expect IT sector growth at 4.0% in FY25E following 2.6% in FY24. Importantly, profit growth is expected to accelerate to a high single digit for FY25E following mid-single digit over the past two years.

We raise target multiples for Wipro Ltd., Tech Mahindra Ltd., and Persistent Systems Ltd., given improving growth/trajectories with a mega deal aiding visibility for Wipro (Reduce), growth momentum in Persistent (Buy), and margin recovery track in Tech Mahindra (Reduce).

Valuation multiples have re-rated, on average, by ~10% over the past month with no change in earnings estimates (mid-single digit cuts over the past three/six months). NIFTY IT index valuations are above the historical premium/discount to NIFTY and Accenture valuations (near peak valuation premium) despite large strides by Accenture on GenAI.

The current valuations at 27 times are more than 10% over the five year average and ~30% above the 10 year average, which limits the upside case.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.