5 Midcap IT Stocks To Buy Ahead Of Quarterly Results

Sharekhan has come up with its latest report on the IT Sector, ahead of results of some of the companies. Here are a few stocks from the IT sector that the brokerage has recommended to buy.

Persistent Systems

The brokerage has a price target of Rs 5550 on the stock. Persistent Systems. "We expect USD revenue to grow by 7.9% q-o-q, led by continued strength in IT service units and incremental revenue from acquisitions (around 2.6% inorganic growth). We expect deal TCVs to remain healthy," the brokerage has said.

According to Sharekhan, the key monitorables would be the commentary on the impact of restructuring of its large IP contract (from January 1, 2022); and margin trajectory and commentary on the pricing environment.

Other monitorables would be steps taken to increase pricing in a selective manner and the commentary on healthcare, BFSI, and technology verticals. The stock of Persistent Systems last closed at Rs 4336 on the NSE.

L&T Infotech

Another midcap IT Stock that Sharekhan has a buy ahead of numbers is L&T Infotech. "We expect constant currency revenue to grow by 5.3% q-o-q and cross-currency headwinds of around 30 bps on its USD revenue. Growth would be led by strong growth in BFS vertical, broad-based demand, higher spends on discretionary areas (cloud and digital transformation programs), and robust client mining," the brokerage has said.

"EBIT margin is expected to decline by 57 bps on a q-o-q basis, owing to supply-side challenges. Net profit is expected to increase by 5.5% on a sequential basis, according to Sharekhan.

Sharekhan has set a price target of Rs 8,300 on the stock of L&T Infotech.

Mastek

Mastek is another midcap IT Stock to buy as per the brokerage for a price target of Rs 3840. "We expect revenue growth of 4.5% q-o-q in USD terms, led by steady growth UK government business and healthcare business and strong growth in US business. Order book is expected to remain healthy in Q4, given continued momentum in deal wins in UK public sector," the brokerage has said.

L&T Tech

Sharekhan expects USD revenue to grow by 4.4% on a q-o-q basis, led by broad-based growth across verticals (except telecom & hi-tech vertical) and geographies. Further, growth would be driven by ramp-up of large deals and strong recovery in the ERD industry. We expect deal wins to remain healthy during Q4.

"EBIT margin is expected to decline by 46 bps q-o-q due to increased hiring expenses to backfill attrition, retention expenses, lower utilization and large deal ramp-ups. Net profit during the quarter is expected to grow by 8.1% q-o-q and 38.3% y-o-y," the brokerage has said.

Birlasoft

For Birlasoft the brokerage has set a price target of Rs 580. "We expect USD revenue to grow by 4.2% q-o-q, led by strong traction in its CMT micro-vertical and ramp-up of deals won in earlier quarters. EBIT margin is expected to decline by ~15 bps q-o-q, owing to higher costs in backfilling the attrition, elevated sub-contractor expenses and investments in the strategic areas. Net profit during the quarter is expected to grow by 2.4% q-o-q," the brokerage has said.