IT Index Booms 5% As Infosys, TCS Rally On Q3 Numbers
IT index trades highest among the indices as all the ten stocks traded higher between the range of 2.8 per cent to 7.7 per cent
The IT blue-chip corporate earnings turned the market green as Infosys and Tata Consultancy Services (TCS) posted their December quarter results. The IT index soared to a whopping 5 per cent in the Friday trading session.
The two tech giants, Infosys and TCS traded 7.74 per cent and 5.29 per cent higher on the National Stock Exchange (NSE). The IT index traded highest among the indices as all the ten stocks traded higher between the range of 2.8 per cent to 7.7 per cent.
Traditionally a seasonally weak period for the IT sector, this quarter faced additional headwinds due to the ongoing economic slowdown in the US and Europe, which are crucial revenue sources for software services exporters.
TCS reported a 4 per cent year-on-year (YoY) increase in revenue to Rs 60,583 crore, with a net profit decline of 2.5 per cent sequentially to Rs 11,058 crore. Infosys experienced a 0.4 per cent decline in revenue to Rs 38,821 crore, coupled with a 1.7 per cent sequential drop in net profit to Rs 6,106 crore.
“TCS earnings were in line with market expectations and have delivered slightly better than estimates, and we expect some positive reaction in the counter in the coming days when compared to its peers. On the other hand, the earnings of Infosys were mixed, with guidance being narrowed by the company, followed by some slower growth in the last quarter,” said Atul Parakh, CEO, Bigul.
During the December quarter, the momentum in deal wins slowed down for both TCS and Infosys, with Infosys witnessing a more substantial impact. TCS secured deals totaling USD 8.1 billion in Q3, marking a decline from the USD 11.2 billion worth of deals secured in the preceding September quarter. Meanwhile, Infosys clinched notable deals amounting to USD 3.2 billion in the December quarter, reflecting a reduction to less than half of its achievements in the September quarter.
“Infosys is concentrating on securing substantial deals to propel further growth. The heightened adoption of next-generation artificial intelligence, such as TOPAZ and Cobalt cloud, is anticipated to generate long-term value for the business. The management is actively engaged in cost optimization efforts with the aim of enhancing margins and ensuring financial efficiency,” stated Choice Broking.
We expect Revenue, EBIT, Profit After Tax (PAT) to grow at a CAGR of 7.7 per cent, 11.7 per cent, 11.4 per cent respectively over FY23-FY26E. We maintain our ‘ADD’ rating with a revised target price of Rs 1,625 implying a PE of 24 times, added Choice Broking.
