Goldman Sachs puts buy ratings on TCS, LTIMindtree, Infosys
Goldman Sachs has initiated coverage on six information technology companies with ‘buy’ ratings on LTIMindtree, Tata Consultancy Services (TCS) and Infosys.
The brokerage has rated a ‘sell’ on Tech Mahindra and Wipro, while a ‘neutral’ on HCL Technologies. Goldman said while India’s IT sector is trading at premium valuations compared to its last 10-year average and almost in line with the five-year average, higher valuations are warranted as growth in technology spending will continue
LTIMINDTREE Rating: Buy | Price Target: Rs 6,310 CMP: Rs 5,173.2 | Upside/Downside: 22%
- Fastest growth among IT firms driven by cross-selling to existing accounts
- Estimated P/E at 29 times versus five-year average PE of 26, and 25% premium to the sector
- Though valuations at a premium, growth outlook stronger versus peers
INFOSYS
Rating: Buy | Price Target: Rs 1,600 CMP: Rs 1,407.7 | Upside/Downside: 13.6%
- Two more quarters of subdued revenue growth
- Strong order book indicates sharp CY24 revenue recovery, which current valuations do not reflect
- Estimated PE at 22 times, in line with five-year average, but 14% discount to TCS and 5% below the sector
TATA CONSULTANCY Rating: Buy | Price Target: Rs 3,930 CMP: Rs 3,399.5 | Upside/Downside: 15.6%
- Defensive play in tough-demand environment
- Expect TCS to be beneficiary of vendor consolidation, given its indepth vertical expertise, and wider portfolio presence
- Estimated PE at 25, in line five-year average, 10% premium to the sector
TECH MAHINDRA Rating: Sell | Price Target: Rs 1,010 CMP: Rs 1,200.9 | Upside/Downside: -15.9%
- Challenged growth prospects due to high exposure to telecom and weaker margin profile
- Valuations do not reflect outlook
- Estimated PE at 21 times, 30% higher than
