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Rationale for a ‘Buy’ on 8 IT stocks as provided by Emkay Global

The Q2 performance for the Fy 22 period has been largely in line with estimates, with just

The overall Q2 performance of IT companies was largely in line with estimates, with just a -0.5-0.1 percent difference in revenue or net profit. Also, on the back of ongoing robust demand for cloud, digital, analytics, IoT, AI, 5G and cybersecurity, there has been reported a pick-up in revenue growth for Tier I and Tier II companies from the space. Likewise, Emkay Global is of the view that this growth momentum shall sustain for IT companies due to continued robust broad-based demand, opening up of top economies gradually as well as strong deal pipeline.

1. TCS: Buy for a target of Rs. 4100

The company is the global IT leader with services such as analytics and insights, blockchain, cognitive business, cybersecurity, enterprise applications, quality engineering , cloud, consulting, engineering and industrial services, automation and AI among others. The company of late is capitalising on its new Cognix solution for bagging major deals. In the last quarter leveraging the cognitive business solution the company lapped up 6 deals across oil and gas, high tech sectors among others. Also, it has been accorded a ‘Buy’ tag by the brokerage for a target of Rs. 4100.

2. Infosys: Buy for a target of Rs. 2100

The company is a globally leading player in advanced digital consulting and services. The company’s host of services are covered under the broader spectrum of Application Development and Maintenance, Business Process Management, Consulting Services and Incubating Emerging Offerings.

Only on Thursday (December 2, 2021), Infosys Prize 2021 ceremony was held virtually to reward intellectuals.

The scrip in early trade on Friday has been among the top gainers and considering the last traded price of Rs. 1736 apiece on the NSE shall offer gains to the tune of 21 percent considering Emkay’s set out target of Rs. 2100.

3. HCL:

The global IT giant with a revenue of US$ 10.82 was spun off into a distinct unit in the year 1991. The company’s services encompass engineering and R&D Services and IT and business services.

Emkay Global has initiated a ‘Buy’ call on the scrip for a target price of Rs. 1420 per share, implying 21 percent upside.

4. Tech Mahindra: Buy for a target price of Rs. 1930

For Tech Mahindra, Emkay has suggested a buy target Rs. 1930 that may mean 21 percent potential upside from the last traded price of Rs. 1593. The stock on December 3, 2021 in intra-day trade hit 52-week high price of Rs. 1638.25.

The company has emerged as the global IT leader in the Dow Jones Sustainability World Index 2021. Further it is only amongst five company to be present in the DJSI World index. The company also tops amongst the top IT companies globally in the “TSV IT services & Internet Software and Services” segment

5. Mphasis: Buy Mphasis for a price target of Rs. 3730

Bengaluru based mid-cap IT company is into offering a host of services from application services to cloud to next-gen data and cloud services among others. At present the company is into acquisition mode and has taken overBlink UX.

For the infrastructure technology and applications outsourcing services provider, the brokerage has set a target of Rs. 3730 which means investors into the stock at current pricing of Rs. 3087 can make 21 percent return.

6. Persistent Systems: Buy for a target price of Rs. 5000

This is another mid-tier IT provider for which Emkay has given a target price of Rs. 5000 which from the current price of Rs. 4336 means 15 percent upside possibility.

Persistent Systems Ltd is an OPD specialty entity that offers advantages of offshore delivery.The company is into designing, developing and maintaining software systems and solutions and also creates new applications and enhances the functionality of the customers’ existent software products.

7. Birlasoft: Buy for a target price of Rs. 550

For this company the brokerage has set a target of Rs. 550 per share. Serving a host of verticals the company is a part of the multibillion-dollar diversifiedCK Birla Group. The company is into offering enterprise technologies and services.

Buy Firstsource Solutions: for a target price of Rs. 230

This is a small cap IT organisation for which Emkay is bullish and has accorded a ‘Buy’ rating for a target price of Rs. 230. From the current pricing of Rs. 173 this would mean a return of 33 percent.

Firstsource Solutions Ltd is a global provider of business process management services. The company offers an array of services in the area of banking and financial services, telecom, healthcare and media.

Disclaimer:

These stocks are the recommendations of Emkay. Stock market investment is risky, investors should engage in their own analysis and research and then take on any investment call.

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Speaking at an event organised by India’s International Financial Services Centres Authority and Bloomberg at GIFT City, Kotak said that Indian banks have been behind the curve and have allowed the growth of UPI payments to be monopolised by Google Pay and Walmart-owned PhonePe, who have got 85% of the market.

“It is a wake-up call for Indian banking: Wake up, or you will see a large part of the financial market move out. From a policy and financial stability point of view, which policymakers have to look at,” said Kotak. He said that bankers were shortsighted in the last two years. “They said there is no money in payments and let the payment market be taken by these two-three companies.”

Kotak said that bankers need to keep in mind that consumer tech companies have revenue models outside finance. “For example, the e-commerce model. Banks under section 6 of the Banking Regulation Act cannot get into non-financial business. There are serious issues of how we are going to draw the line and simultaneously there is an issue of financial stability,” said Kotak.

The chief of the country’s third-largest private bank also made a reference to the raising of deposits by payment platform Google Pay and to the central bank’s move to ban first loss default guarantees provided by lending platforms. He said that there was a need to establish who was responsible for the deposits and who was bearing the risk on loan assets.

According to Kotak, a competition between a regulated entity and a fintech or consumer tech usually ends up with the tech company being fast and loose on regulation and gaining market share at great speed. “I am not against competition. All I am saying, in the name of competitive service, we do not have a systemic and stability challenge at the same time,” he said. He urged authorities to take UPI and the Aadhaar-Enabled Payment Systems global. He said that there is already a partnership with Singapore, but there was a need to take this to other developing markets such as Bangladesh and African countries.