Q3 likely to be last weak quarter, expect revenue growth for Indian IT firms from Q4: BNP Paribas
Q3 result preview: IT firms expected to post muted revenue, subdued profit amid weak demand "We think the industry is close to the trough of this cycle. Signs of improvement in the global economy and strong deal wins in recent quarters give us confidence about the revenue growth acceleration that we forecast for FY25," said BNP Paribas. The financial firm prefers large-cap firms with strong client relationships, scale to invest in GenAI (Generative AI) and reasonable valuations.
BNP Paribas has an "outperform" view on HCL Technologies (target price: ₹1,610), Infosys (target price: ₹2,000), LTIMindtree (target price: ₹6,700), Persistent Systems (target price: ₹7,600) and Tata Consultancy Services (target price: ₹4,560). On the flip side, it has an "underperform" view on Redington (target price: ₹135) and Wipro (target price: ₹400). BNP Paribas has "neutral" views on Mphasis (target price: ₹2,400) and Tech Mahindra (target price: ₹1,250).
"Our sector top pick is Infosys, and we also like TCS and HCL Tech. We prefer LTIMindtree and Persistent Systems for their strong earnings growth potential. We revise our earnings estimates for the firms we cover with the highest increases for Infosys and HCL Tech, as we see them benefitting from discretionary demand recovery in the second half of the next financial year (H2FY25), said BNP Paribas.
(Exciting news! Mint is now on WhatsApp Channels. Subscribe today and stay updated with the latest financial insights! Click here!) BNP Paribas expects Q3FY24 CC organic revenue growth at -2 per cent to +3.6 per cent for its large-cap coverage. Apart from this, it expects mid and small caps to report 0.5-2.7 per cent quarter-on-quarter (QoQ) dollar organic revenue growth.
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