Where should you invest post earnings: TCS, Infosys, Wipro or Mindtree?

"India's second largest IT company reported a net profit of Rs 5,421 crore for Q2 beating street estimates"

Where should you invest post earnings: TCS, Infosys, Wipro or Mindtree?
India's second largest IT company reported a net profit of Rs 5,421 crore for Q2 beating street estimates. The net profit rose 4.4% sequentially. Infosys also raised its constant currency guidance to 16.5-17.5% for FY22, from 14-16%.

It has been a strong show by IT majors Infosys, Wipro and Mindtree after disappointing results from TCS last week. After a few days of declines, IT stocks are back in the front row steering the markets at record highs but where should investors keep their focus? Here’s a look at the key highlights of IT earnings and what are top analysts and brokerage houses recommending.

Infosys

India’s second largest IT company reported a net profit of Rs 5,421 crore for Q2 beating street estimates. The net profit rose 4.4% sequentially. Infosys also raised its constant currency guidance to 16.5-17.5% for FY22, from 14-16%. Earnings before interest and taxes (EBIT) of Rs 6,972 crore, as against Rs 6,603 crore for the previous quarter and its  EBIT margin came in at 23.6 percent versus 23.7 percent in Q1FY22.

The board also announced an interim dividend of Rs 15 per share for the current financial year.
The company’s attrition however was high at 20.1% and rose from 13.9% in the previous three months. High attrition is due to massive demand for software engineers.  Infosys however has announced that it is expanding its college graduates hiring program sharply this year.

Brokerage Take on Infosys 

Motilal Oswal Financial Services believes the company reported strong and all round beat on estimates on earnings and that the guidance revision was above expectations. “Our relative preference is Infosys above TCS for its room for growth potential”, said MOFSL in its report.
Suyog Kulkarni, Senior Research Analyst at Reliance Securities prefers Infosys over TCS in the current scenario because he believes that their revenue growth performance will be higher.
“Infosys is presently trading at a higher single-digit discount compared to TCS but it seems like this year the revenue growth performance of Infosys will be higher than TCS. So in our pecking order also we prefer Infosys over TCS,” he said.
CLSA  has a Buy rating on Infosys with a price target of Rs 2060. “Infosys’ Q2 results are reassuring on the demand strength and the company’s ability to manage rising supply-side pressure,” CLSA said in its report.

Wipro

IT major Wipro on Wednesday reported a 17% jump in consolidated net profit to Rs 2,930 crore and its consolidated revenue increased by about 30% to Rs 19,667 crore in Q2. Wipro shares hits new high, rallies 8% on strong revenue growth

Brokerage Take on Wipro

“We see the guidance as positive, given the supply constraints and seasonality, but remain watchful on margin as the company continues to operate ahead of its guidance of 17-17.5 per cent,” Motilal Oswal Financial Services (MOFSL) said in a result update.

UBS | Rating: Neutral | Target: Rs 660

Macquarie | Rating: Outperform | Target: Raised to Rs 780
JPMorgan | Rating: Neutral | Target: Rs 670

Mindtree

Company reported a net profit of Rs 399 crore for Q2 That marked a sequential rise of 16.2% from the net profit of Rs 343.4 crore.
Mindtree shares have rewarded investors with a return of 171% in the past year. In the past six months alone, Mindtree shares have risen nearly 110 percent in value.

Brokerage Take on Mindtree

“The company reported strong margins despite wage revisions”, said Motilal Oswal in its report. It has a Rs 4460 target price amid positive outlook but are wary of high valuations.

“We are only 10-20% into the IT upcycle the best of the rally is ahead. Mindtree can rise 5x or 10x from here”, said Sandeep Agarwal of Edelweiss Securities.
Goldman Sachs on the other hand has increased its EPS estimates for Mindtree by up to 3% over FY22-FY26. However, it has maintained its ‘sell’ rating due to rich valuations.

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