2 Stocks From The IT Sector Where HDFC Securities Has A “Buy” Call

HDFC Securities has placed a "buy" call on the stocks of Persistent and LTI Mindtree in its latest brokerage report on the IT sector. The brokerage firm has set a target price of Rs 5830 on the stock of LTI Mindtree and a target price of Rs 6410.

"We hosted the ISG index call and the key message was recovery in the business environment ahead. While ISG maintained the CY23 outlook on growth in managed services deal bookings (+5% for CY23), recovery ahead is based on (1) improving pipeline for new scope projects (vs. renewals & extension heavy recently that drove vendor consolidation); (2) approval threshold for projects and transition timelines normalising with stable pricing environment; (3) pipeline build-up for SIs with increased enterprise interest in captives; and (4) stability to return in BFSI, which was impacted by executive movement earlier in enterprises," the brokerage has said.

According to the brokerage, the current disconnect between the growth in bookings and soft revenue growth is largely due to the impact on discretionary services. Contract activity was stronger in the EMEA region (five of the 10 mega deals in EMEA), which corresponds with commentary by tier-1 IT services,"

"Within verticals the strongest growth in bookings was in Manufacturing, Pharma & Healthcare verticals, while bookings in the BFSI vertical declined. The call takeaway is a positive read-through for the sector corroborating our estimate of recovery in H2FY24E. Our recent note laid out some of the vertical trends (IT sector - mixed signals, stay selective). A shift back to new scope deals as well as recovery in BFSI can be positive read-through for mid-tier IT, LTIMindtree and Mphasis. Maintain our preference for LTIMindtree and Persistent from our coverage universe," HDFC Securities has said in its report.

Disclaimer

The stocks have been picked from the brokerage report of HDFC Securities. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before taking any investment decision.