IT Services Q2 Results Preview - A Slow But Certain Revival: Motilal Oswal

Motilal Oswal Report

Client spending behavior is showing positive trends, indicating a potential return of modernisation and discretionary spending, albeit in some pockets.

Among tier-I players, we prefer HCLTech Ltd. and LTIMindtree Ltd. for their strong capabilities in data engineering, engineering research and development offerings (HCLTech) and ERP modernization, making them well-suited for pre-GenAI spending. Their portfolio mix of discretionary and nondiscretionary businesses should also support growth in the current business environment.

For tier-II players, our top picks are Persistent Systems Ltd. and Coforge Ltd., both poised for strong performance. Persistent Systems benefits from its focus on high-growth sectors like banking and financila services and healthcare.

For Coforge, despite uncertainties surrounding the Cigniti integration, we believe it can achieve cost synergies sooner than anticipated, presenting upside risk to our estimates.

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