Stock picks: Coforge, Mastek, Birlasoft among Sharekhan’s preferred midcap IT stocks to buy ahead of Q2 results
Also Read: Earnings preview: Indian IT firms to report soft numbers in Q2FY24; revenue, profit likely to be muted Meanwhile, in the second quarter of FY24, the brokerage firm expects continuity of uncertainty to result in another muted quarter in a seasonally strong quarter for tier 1 companies, which are expected to report constant currency (CC) revenue growth of -0.4% to 1.1% QoQ; while few of the select outperforming tier 2 companies may witness some moderation, with CC revenue growth of 1.5% to 4.4% QoQ. Also Read: Stocks to buy: Here's why HDFC AMC, IndusInd Bank are top picks this week Among midcap IT stocks, Sharekhan’s preferred picks in the sector are Persistent Systems, Coforge, Mastek, and Birlasoft.
Persistent Systems is expected to report sequential revenue growth at 3.1% in CC terms in Q2FY24, aided by ramp-up of deals, offset by weakness in the financial service vertical. The company’s EBIT margin is expected to decline by around 90 bps QoQ, impacted by wage hikes, offset by operational efficiencies, according to Sharekhan analysis.
The brokerage has a ‘Buy’ rating on the stock with a target price of ₹6,000 per share. (Exciting news! Mint is now on WhatsApp Channels Subscribe today by clicking the link and stay updated with the latest financial insights! Click here!) Coforge is expected to report sequential revenue growth of 2.8% in CC terms, aided by ramp-up of deals, Sharekhan said.
EBIT margin in the July-September 2023 quarter is likely to improve by around 190 bps QoQ, aided by operating efficiencies, following the sharp decline in Q1FY24. Sharekhan has a ‘Buy’ call on Coforge with a target price of ₹6,200 per share, implying an upside of over 19% from Friday’s closing price.
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