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Informist, Thursday, Apr. 3, 2025

--Nomura cuts target prices of several IT companies by 3-21% 

--Nomura upgrades LTIMindtree, Mphasis to 'neutral' from 'reduce' 

--Nomura cuts Infosys target price by 12% to INR 1,950; retains 'buy' rtg 

--Nomura cuts Wipro's target price by 10% to INR 300; retains 'buy' rtg 

--Nomura cuts Tech Mahindra target price 14% to INR 1,640; retains 'buy' rtg 

--Nomura on IT: Uncertainty on US tariff may slow decision making by clients 

--Nomura on IT: Uncertainty on US tariff may impact revenue growth in FY26 

--Nomura on IT: Cut FY26 sales growth outlook by 230-350 bps for large-caps 

MUMBAI – Nomura Global Markets Research has cut its target price for several Indian information technology companies by 3-21% as it expects revenue growth to be slower due to uncertainty around US tariffs. The brokerage firm has cut the target price of Tech Mahindra Ltd., Infosys Ltd., Wipro Ltd., HCL technologies Ltd., and Tata Consultancy Services Ltd. by 14%, 12%, 10%, 8%, and 6% to INR 1,640, INR 1,950, INR 300, INR 1,840, and INR 3,890, repsectively. However, it has kept their rating unchanged – it has 'buy' rating on all these companies except TCS, on which it has a 'neutral' rating.

Uncertainty around tariffs by the US is expected to slow down the decision-making of clients of IT companies, Nomura said, adding that the macroeconomic uncertainty might lead Infosys and HCL Tech to post similar growth in 2025-26 (Apr-Mar) as in FY25, and TCS to post slower growth due to lack of Bharat Sanchar Nigam Ltd. project backfill. The brokerage has cut its revenue growth estimate for the large-cap IT companies for FY26 by 230-350 basis points. It has also cut its earnings per share estimate for the large-cap companies by 7% for FY26-FY27, 1-9% lower than the Street's estimates. 

The March quarter is likely to be a subdued one for large-cap IT companies, as they are expected to post a sequential
drop in revenues, with Infosys' revenue dipping 1% in constant currency terms, Tech Mahindra's revenue sliding 0.8%, Wipro's revenue dropping 0.4%, and both TCS and HCL Tech's revenue falling 0.5%, Nomura said in a report on Wednesday. Mid-caps, on the other hand, are likely to report a better performance, with L&T Technology's organic revenue growing 6% in constant currency terms, Persistent Systems' revenue growing 4.9% and Mphasis' revenue growing 2.9%, the brokerage said.

Nomura has also upgraded LTIMindtree Ld. and Mphasis Ltd. to 'neutral' from 'reduce'. It has kept the target price of INR 2,530 unchanged for Mphasis but cut the target price of LTIMindtree by 6% to INR 4,770. It has slashed the target price of Birlasoft Ltd. by 21%, the most for any IT company, to INR 440, while keeping the 'neutral' rating unchanged.

LARGE-CAP

The brokerage expects large-cap IT companies--TCS, Infosys, HCL Tech, Wipro, Tech Mahindra, and LTIMindtree--to post a sequential fall in revenue growth for the March quarter. While LTIMindtree and TCS are expected to post a 0.3 and 0.6% fall, respectively, Infosys is likely to be the biggest laggard with a 1.5% fall in constant currency terms. HCL Tech, Wipro, and Tech Mahindra will likely report a 1% fall each, Nomura said. 

On the margin front, Infosys and HCL Tech are likely to record contraction of 150 bps in their respective earnings before interest and tax margins, whereas LTIMindtree and Tech Mahindra are expected to see a 10 bps and 20 bps expansion in their respective margins. Appreciation in the dollar would have likely driven cross-currency headwinds of 10-60 bps across its coverage, Nomura said.

The brokerage has upgraded LTIMindtree to 'neutral' as it expects the company's growth trajectory to improve in FY26, though moderately, on the back of increased deal wins. The total contract value of deal wins rose to $1.7 billion in the December quarter from $1.3 billion-$1.4 billion, Nomura said. Apart from revenue, the brokerage also expects a gradual recovery in the company's EBIT margin. 

MID-, SMALL-CAP

Barring Birlasoft, other mid- and small-cap companies are likely to post sequential growth in revenue for the March quarter in constant currency terms, according to Nomura. It expects Birlasoft's revenue to slide 2% sequentially for the March quarter in constant currency terms, while it has the strongest growth outlook for Coforge among mid-cap IT stocks.

Nomura upgraded the rating of Mphasis due to expectation of 2.9% revenue growth during the March quarter in constant currency terms, along with deal wins worth $400 million. The brokerage finds the company's trading one-year forward price-to-earnings multiple of 21.3 inexpensive, given its improving growth prospects.  End

US$1 = INR 85.64

Reported by Aman Aryan

Edited by Avishek Dutta

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