Infosys, TCS shares: Here are stock price targets post recent correction

Infosys Ltd and Tata Consultancy Services Ltd (TCS) have seen up to 11 per cent drop in the last one month against a flattish Sensex during the same period. While the largest software exporter TCS did deliver better-than-expected quarterly earnings with a 9 per cent profit growth, Infosys is seen reporting a flattish March quarter profit on Thursday, April 18. 

Infosys is seen reporting 3-4 per cent year-on-year (YoY) growth in sales against TCS' reported Q4 sales growth of 3.5 per cent. Against TCS' reported Ebit margin of 24.6 per cent (up 150 basis points YoY), Infosys Ebit margin is seen at 23.7 per cent, down 38 basis points. This would be due to wage hikes during the quarter.

The TCS commentary was strong. All eyes would be on Infosys FY25 constant currency (CC) revenue guidance. For now analysts see Infosys guidance of 4-7 per cent and modestly positive demand commentary vis-à-vis FY24.

Including Tuesday’s 3 per cent fall, Infosys shares are down  12 per cent in the past one year. TCS shares have fallen 6.46 per cent during the same period.

In the case of TCS, BNP Paribas noted that cyclical revenue-growth recovery has finally started after the slowdown that lasted six quarters. This, it said, was visible in uptick in YoY CC revenue growth. Record quarterly deal-wins with higher new revenue, improving demand visibility and a solid margin beat were key positives in TCS' 4QFY24 results, it said.

"While management was cautious about signalling the timing of the recovery, it was confident of a revenue-growth pickup in FY25," BNP Paribas said while suggesting  a target of Rs 4,640 on the stock. Axis Securities has a target of Rs 4,250 on TCS, InCred Equities Rs 4,039 and Nuvama Rs 4,560.

Among foreign brokerages, JPMorgan upgraded the stock to 'overweight' and suggested a price target of Rs 4,500. Goldman Sachs finds it worth Rs 4,350. Jefferies has 'Hold' on the scrip with the target price of Rs 4,030. UBS sees it at Rs 4,700, HSBC at Rs 4,540 and Morgan Stanley at Rs 4,350. Nomura has a low target of Rs 3,250.

Ahead of Infosys' quarterly results, Kotak Institutional Equities has a target of Rs 1,790 on the stock. Antique Stock Broking finds the stock worth Rs 1,675 while Sharekhan and Nuvama Institutional Equities see the stock at 1,850.

"We expect Infosys to hold out revenue growth guidance for FY25 in the 4-7 per cent CC range. We expect margin guidance to be similar to FY24 (20-22 per cent EBIT margin). We think that risk on revenue is to the downside post the recent commentary of global IT Services players like Accenture, Capgemini and Cognizant," said Nirmal Bang Institutional Equities.