5Paisa expects the Indian IT sector to witness continued growth momentum in Q4FY22, with US$ revenue growth of 2.7% QoQ(18% YoY), led by resilient demand despite the -40bps impact from cross-currency changes. The geopolitical crisis or the resultant hyperinflationary environment has not impacted the sector as much and the deal pipeline has stayed robust in Q4.
Analysts at 5Paisa expect the EBIT margins to contract by 40bps QoQ due to strong hiring and the consequent dip in utilisation in levels along with increased back-filing costs for high attrition, partly offset by operating leverage. The supply-side pressures might impact the margins.
The clients of these companies are looking forward to accelerating digital transformation and this is expected to keep the IT demand healthy.
Here are 5 stocks recommended by 5Paisa:
Infosys
The analysts forecast a 3% cc QoQ revenue growth in the March quarter led by broad-based momentum across verticals, partly impacted by seasonality. They expect the deal momentum to remain healthy and are watching for the quantum and number of large deals, commentary about the deal pipeline for FY23 and supply-side issues and attrition trends.
- Recommendation: Buy
- CMP: ₹ 1,887.75
- Target: ₹ 2,250
- Potential Upside: 19.19 %
Tech Mahindra
The analysts are expecting a forecast revenue growth of 5.6% cc QoQ, driven by communication vertical seasonality and acquisitions. They expect the operational margins to contract by 60bps QoQ as operational improvements might be offset by supply-side pressures.
- Recommendation: Buy
- CMP: ₹ 1,493.60
- Target: ₹ 1,800
- Potential Upside: 20.51%
Coforge
The company could post a 4.6% cc QoQ growth driven by broad-based momentum across verticals, as per the analysts at 5Paisa. They say that there could be a 3.8% c QoQ, led by growth in the transportation vertical, partly offset by restructuring in the communication vertical.
- Recommendation: Buy
- CMP: ₹ 4,438.45
- Target: ₹ 5500
- Potential Upside: 23.92%
HCL Technologies
The analysts expect a 1.4% cc QoQ growth for quarter 4 as the strength in its IT services and ER&D is offset by the weak seasonality of the products business.
- Recommendation: Buy
- CMP: ₹ 1,177.00
- Target: ₹ 1350
- Potential Upside: 14.69%
Larsen & Toubro Infotech Ltd
Revenue growth of 5% cc QoQ is expected by the analysts aided by continued momentum in its largest vertical BFS.
- Recommendation: Buy
- CMP: ₹ 6,295.10
- Target: ₹ 7050
- Potential Upside: 11.99%
Disclaimer
The views and investment tips expressed by 5Paisa on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Dailyraven Technologies or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.
