TCS, Infosys, Wipro, HCLTech, TechM, Sonata Software, R Systems shares: Check ratings, outlook

IT services companies delivered modest revenue growth in the June quarter, with Tier-I firms reporting constant-currency (CC) growth ranging from a 1.2 per cent decline to 2.6 per cent sequential (quarter-on-quarter) growth, according to brokerage Systematix Institutional Equities.

The brokerage said client-specific headwinds, delayed deal ramp-ups and challenging macroeconomic factors weighed on growth. However, profitability remained resilient despite weak operating leverage and investments, supported by cost measures and currency tailwinds.

Deal wins were mixed across both Tier-I and mid-cap IT companies, with demand skewed towards cost takeout, vendor consolidation and the setting up of global capability centres (GCCs).

Systematix said elevated artificial intelligence (AI) investments and demand for productivity gains are expected to keep growth modest in the near-to-medium term.

Among large-cap IT stocks, the brokerage has a 'HOLD' rating on Tata Consultancy Services Ltd (TCS), with a target price of Rs 2,350. It has also maintained a 'HOLD' rating on Infosys Ltd with a target price of Rs 1,150.

Wipro Ltd has a 'HOLD' rating with a target price of Rs 170, while HCLTechnologies Ltd also carries a 'HOLD' rating with a target price of Rs 1,180.

Systematix has a more positive view on Tech Mahindra Ltd, assigning a 'BUY' rating with a target price of Rs 1,740.

Among the other IT stocks, Sonata Software Ltd has a 'SELL' rating with a target price of Rs 260, while R Systems International Ltd has a 'BUY' rating with a target price of Rs 300.

Separately, Systematix preferred Coforge in the mid-cap IT segment, citing market-share gains, capability building and healthy deal wins. The brokerage, however, did not assign a rating or target price to the stock.