ICICI Securities has downgraded TCS, HCLTech, Wipro, Tech Mahindra, LTM, Hexaware Tech and LatentView Analytics and also cut its price target on these stocks in its note.
| Stock | Rating | Old Target (₹) | New Target (₹) | Upside (%) |
| TCS | Reduce From Add | 2,800 | 1,860 | -6 |
| HCLTech | Reduce From Hold | 1,370 | 910 | -12 |
| Wipro | Reduce From Hold | 200 | 156 | -9 |
| Tech Mahindra | Reduce From Hold | 1,390 | 1,210 | -11 |
| LTM | Reduce From Hold | 4,200 | 3,260 | -8 |
| Hexaware | Add From Buy | 580 | N/A | 5 |
| LatentView | Add From Buy | 430 | 290 | 10 |
TCS Target Cut
ICICI Securities expects TCS’ US Dollar revenue growth to be flat on a sequential basis in the first quarter, led by delays or deferrals in the ramp-up of TCV to revenue due to weak macros from the West Asia war.
It also expects EBIT margins to contract by 150 basis points sequentially, led by a three-month impact from the annual wage hike, investments in AI and sales & marketing, which are likely to be offset by currency tailwinds.
Infosys Does Not Get A Downgrade
Infosys could see organic revenue growth of 0.9% sequentially during the quarter and another 0.9% contribution for two months from the Optimum Healthcare consolidation.
Infosys’ TCV is likely to remain in-line with the average of the last four quarters, as per ICICI Securities, but margins may shrink by 20 basis points.
HCLTech May See a Revenue Drop
The company’s revenue is likely to decline 0.9% sequentially in constant currency terms led by client-specific spending cuts, according to ICICI Securities.
EBIT margins may contract by 25 basis points sequentially due to the absence of operating leverage on revenue growth, employee restructuring costs and AI investments.
The brokerage also noted that the CTG and Jaspersoft acquisitions have not yet been consolidated.
What Is Expected Of Indian IT In Q1?
- Here are the important points on which ICICI Securities is awaiting clarity on from the company’s managements:
- Whether there is or could be any incremental weakness or delays in decision making due to a direct or indirect impact of the West Asia conflict.
- Whether increasing competitive intensity is inducing a higher AI deflation
- How are the advanced AI deals and revenue scaling up and how are the pricing models changing
- Any impact from any exposure to the cybersecurity vulnerabilities after the launch of Mythos and similar AI models.
- Quantum and outlook for AI investments
- Employee headcount / salary structure restructuring plans, and
- IT spending outlook in the technology vertical, where cut in IT spends seem to be the highest.
As a result, ICICI Securities has turned from “neutral” to “negative” on the Indian IT sector, particularly Largecap IT, given the protracted low-to-mid single-digit revenue growth expectations for this pack and the downside risks also being more pronounced.
The brokerage prefers Mphasis and Coforge but the sector could get bogged down by headwinds emerging from challenging macros.
