The global brokerage firm Jefferies has lowered its earnings per share (EPS) projections for Indian IT firms, with reductions ranging from 2 percent to 14 percent.
Jefferies noted that unless there is a significant improvement in the US GDP growth outlook, a re-rating of IT sector stocks appears unlikely. The firm prefers companies with more stable growth prospects and less risk of valuation corrections, listing Infosys, Coforge, and Sagility among its top recommendations.
The brokerage has also revised its price targets downward for a number of Indian IT companies, trimming them by 5 percent to 32 percent due to rising uncertainty in the industry.
In addition, Jefferies has downgraded LTIMindtree and Mphasis, citing their substantial dependence on the US market and their exposure to discretionary IT spending.
Following are the IT stocks that Jefferies has downgraded, along with their revised price targets by up to 32 percent:
Infosys Limited
With a market cap of Rs. 5.78 lakh crores, the stock moved down by nearly 3.4 percent on Wednesday. Jefferies has maintained a ‘Buy’ rating on Infosys, but cut its target price by 7 percent, from Rs. 1,835 to Rs. 1,700 per share. Despite the revision, this still indicates a potential upside of around 22 percent from the current market price of Rs. 1,394.8.
HCL Technologies Limited
HCL Technologies, holding a market cap of Rs. 3.73 lakh crore, saw its stock fall nearly 3 percent on Wednesday. Jefferies maintained a ‘Hold’ rating on the stock, while lowering the target price by 20 percent to Rs. 1,520 from the earlier Rs. 1,900. This suggests a potential upside of about 10 percent from its present level of Rs. 1,378.
Coforge Limited
With a market cap of Rs. 41,428 crores, the stock moved down by nearly 4.5 percent on Wednesday. Jefferies continues to recommend a ‘Buy’ on the stock but has reduced its target price significantly—by 24 percent—to Rs. 7,860 from Rs. 10,350. This still leaves room for an estimated 27 percent upside from the current trading level of Rs. 6,194.
Tech Mahindra Limited
Tech Mahindra, valued at Rs. 1.24 lakh crore in market cap, declined by around 4 percent on Wednesday. Jefferies lowered the company’s target price by 24 percent, adjusting it from Rs. 1,510 to Rs. 1,140 per share. This reflects a potential downside of nearly 11 percent from the present price levels of Rs. 1,276.
Sagility India Limited
With a market cap of Rs. 17,887.4 crores, the stock dropped by nearly 3 percent on Wednesday. Jefferies has maintained its ‘Buy’ rating for Sagility but trimmed the price target by 25 percent to Rs. 48 per share from the earlier Rs. 64. This implies a potential upside of roughly 26 percent from its current market price of Rs. 38.
Tata Consultancy Services Limited
With a market cap of Rs. 11.76 lakh crores, the stock moved down by nearly 2.4 percent on Wednesday, after the brokerage downgraded TCS from ‘Buy’ to ‘Hold’ rating, citing limited growth visibility. Jefferies has slashed the target price by 27 percent to Rs. 3,300 from Rs. 4,530, representing a marginal upside of around 1.5 percent from the current price of Rs. 3,251.
Mphasis Limited
Mphasis, which has a market cap of Rs. 39,937 crore, fell about 5.4 percent in trading on Wednesday. Jefferies has downgraded the stock from ‘Buy’ to ‘Hold’ and cut its target price by 29 percent, reducing it from Rs. 3,250 to Rs. 2,300 per share, representing a potential upside of nearly 9 percent from current price levels of Rs. 2,101.
Wipro Limited
With a market cap of Rs. 2.47 lakh crores, the stock moved down by nearly 5.4 percent on Wednesday, after Jefferies downgraded Wipro to ‘Underperform’ from ‘Hold’ rating, citing high reliance on discretionary IT spending. The firm also reduced its target price by 32 percent, bringing it down from Rs. 310 to Rs. 210 per share, indicating a downside of nearly 11 percent from the current market price of Rs. 236.
Written by Shivani Singh
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