The brokerage has rated a ‘sell’ on Tech Mahindra and Wipro, while a ‘neutral’ on HCL Technologies. Goldman said while India’s IT sector is trading at premium valuations compared to its last 10-year average and almost in line with the five-year average, higher valuations are warranted as growth in technology spending will continue
LTIMINDTREE
Rating: Buy | Price Target: Rs 6,310 CMP: Rs 5,173.2 | Upside/Downside: 22%
- Fastest growth among IT firms driven by cross-selling to existing accounts
- Estimated P/E at 29 times versus five-year average PE of 26, and 25% premium to the sector
- Though valuations at a premium, growth outlook stronger versus peers
INFOSYS
Rating: Buy | Price Target: Rs 1,600 CMP: Rs 1,407.7 | Upside/Downside: 13.6%
- Two more quarters of subdued revenue growth
- Strong order book indicates sharp CY24 revenue recovery, which current valuations do not reflect
- Estimated PE at 22 times, in line with five-year average, but 14% discount to TCS and 5% below the sector
TATA CONSULTANCY
Rating: Buy | Price Target: Rs 3,930 CMP: Rs 3,399.5 | Upside/Downside: 15.6%
- Defensive play in tough-demand environment
- Expect TCS to be beneficiary of vendor consolidation, given its indepth vertical expertise, and wider portfolio presence
- Estimated PE at 25, in line five-year average, 10% premium to the sector
TECH MAHINDRA
Rating: Sell | Price Target: Rs 1,010 CMP: Rs 1,200.9 | Upside/Downside: -15.9%
- Challenged growth prospects due to high exposure to telecom and weaker margin profile
- Valuations do not reflect outlook
- Estimated PE at 21 times, 30% higher than five-year average and 42% above 10-year average
WIPRO
Rating: Sell | Price Target: Rs 385 CMP: Rs 415.2 | Upside/Downside: -7.2%
- Expectations of weakest growth profile among peers
- Estimated PE of 18 times, in-line with five-year average and about a 21% discount to the sector
- Value Wipro at 16 times estimated PE given weak revenue growth outlook in FY24
HCL TECHNOLOGIES
Rating: Neutral | Price Target: Rs 1,160 CMP: Rs 1,182.2 | Upside/Downside: -1.9%
- Risks to near-term revenue growth
- Well positioned from FY25; suggests balanced risk-reward
- Trading at 19 times estimated PE, 18% premium to five-year average
