IT majors TCS, Infosys and HCL Technologies will soon be releasing business results for the second quarter of the current fiscal (Q2FY23), July-September. The country’s largest software services company, Tata Consultancy Services (TCS), is all set to release its Q2 results on October 10.
IT giant Wipro and Infosys will announce their second quarter financial results on October 12 and October 13, respectively.
Indian IT giant Infosys could announce a share buyback along with its second-quarter earnings for its second quarter ending September 2022 for its current fiscal (Q2 FY23), analysts at global brokerage Jefferies believe.
“Infosys may announce a buyback along with its Q2FY23 results,” Jefferies said in a preview earnings report. The broker did not comment on the expected size or pricing of the issue.
Redemptions are the most tax-efficient way to return cash to shareholders. It is also used by some companies to stop the stock price from falling as it attracts more investors. Infosys is one of the scrips that have been under selling pressure throughout the calendar year.
In the past five years, the company has made three buybacks. The largest – worth Rs 13,000 crore was launched in November 2017, followed by Rs 8,260 crore issuance in March 2019 and Rs 9,200 crore issuance in June 2021.
IT Industry Outlook
ICICI Securities believes that according to the earnings seasons of recent quarters, NSE IT’s outperformance could reverse as it reports Q2FY23 results. The domestic brokerage said macroeconomic challenges have worsened over the past three months. The impact of the macro weakness on the technology sector is thus visible, the report said.
“We still believe that adoption in the industry should be slow and gradual
nature, as there are unknown risks ahead that could deteriorate further
ratings. We also believe that further consolidation of IT stocks could take place to:
we’re getting clarity on CY23’s IT budgets,” it added.
Edelweiss expects TCS, Infosys and Wipro to report sequential revenue growth of 0.8 percent, 2.9 percent and 2.2 percent in dollars, respectively. It sees EBIT margin improving by 60 bps quarterly for TCS, 40 bps for Infosys and 30 bps for HCL Technologies.
As for the bottom line, Nirmal Bang Institutional Equities sees Infosys posting 11.8 percent yoy (up 13.1 percent quarter on quarter), up in net profit at Rs 6,063.40 crore. TCS reports an increase in net profit of 5.8 percent year-on-year (7.4 percent quarter-on-quarter) at Rs 10,182 crore. HCL Tech posts 9.6 percent growth (9 percent qoq) in year-over-year profit at Rs 3,578 crore
Stocks to choose
Jefferies has a ‘buy’ rating on Infosys and a price target of Rs 1,700, suggesting healthy gains from now on. On the other hand, it has “hold” ratings on TCS and HCL Tech. The price targets for the two stocks indicate a single digit uptrend.
Motilal Oswal owns all three stocks. “We continue to favor Tier I players over their Tier II counterparts, given their relative valuation attractiveness and diversified client portfolio. Among Tier I players, we prefer TCS, HCL Tech and Infosys. We expect Infosys to deliver top quartile growth, supported by strong deals and price revisions. HCL Tech is one of the major beneficiaries of cloud adoption at scale, given its expertise in IMS,” it said.
TCS, Motilal Oswal said, remains best positioned to take advantage of the long-term structural tailwind in Tech Services and should see a relative rebound in growth, helped by the base effect and heightened aggression. This brokerage has a target of Rs 1,170 on HCL Tech (25 percent upside potential), Rs 3,530 on TCS (17 percent upside potential) and Rs 1,640 on Infosys (16 percent upside potential).
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