HOME > BUSINESS > Valuation of IT stocks like TCS, Infosys at historic lows, not much downside – Edelweiss

Valuation of IT stocks like TCS, Infosys at historic lows, not much downside – Edelweiss

Stocks of Indian IT service providers like Tata Consultancy Services, Infosys Ltd, HCL Technologies etc. are near their historic lows in terms of valuation and do not have much more scope for further correction, Edelweiss Financial Services said.

“IT stocks have corrected sharply in the past couple of months led by INR appreciation and portfolio shifts. While we acknowledge that rupee appreciation will impact earnings of large-cap IT players in the 2.5-5.0% range, we do not expect a further decline in trading multiples as they are currently close to historic lows of post Lehman crisis, while the current situation is almost opposite as demand is on a strong footing,” the brokerage said in a note.

It said domestic demand and initiatives by the new government like restoration of STPI status, uniform taxes and improved relations with the US to be helpful to the IT sector.

IT-stock-valuation-india

IT stocks have corrected nearly 10% since Modi came to power due to the rise in the value of the rupee. This correction has come after they fell substantially since February this year due to the chances of a turnaround in the Indian economy. IT stocks typically fall when Indian does well, as money is reallocated to India-oriented stocks.

Edelweiss said it was reducing earnings estimate for large IT companies by 2.5-5.6% to factor in INR/USD of 58 and 56 for FY15E and FY16E, respectively.

“Based on same, we are revising target prices of Infosys, TCS, Wipro, HCL Tech and TECHM to INR4,307, INR2,538, INR581, INR1,591 and INR2,229, respectively,” it said.

Contrary to FY09, currently demand is on a firm footing riding US recovery and new technologies. “Hence, in our view, the chance of further multiple de-rating is limited and the impact of INR appreciation will be limited to 2.5-5.0%, which caps the downside risk to 5-9%.”

Edelweiss said Narendra Modi, the soon-to-be-elected Prime Minister, in all recent interactions has emphasized the need to revive exports. So “a stable currency is a natural corollary. Also, his effective use of IT in Gujarat to reduce human interface to a great extent as well its aggressive use in his campaigns—3D meetings, social media interactions —bodes well for the domestic IT space. Increasing role of IT in governance will boost domestic IT spending, which is bound to impact the sector positively.”

It said there were a few pain points hampering execution, which the new government will need to address.

“On top of the wish list of IT companies are: (a) restoration of STPI benefits; (2) relief from applicability of both service tax and VAT on software licences; and (3) better diplomatic engagement with US to avoid harsher immigration clauses. Based on our analysis, we believe resolution of these issues will enable IT companies to not only enhance their earnings by 2%, but also smoothen execution.”

Follow ULTRA.news
INFOSYS Board Backs Vishal Sikka, criticizes Murthy Infosys Ltd director board today came out strongly in support of ex-CEO Vishal Sikka and issued a strong rebuttal to a letter released by Infosys founder Narayana Murthy.Earlier in the day, Murthy was scathing in his review of the actions taken by the company and its board in...
WATCH LIVE: Vishal Sikka Press Conference on Resignation from Infosys Infosys co-chairman Ravi Venkatesan today assured investors and employees of Infosys that the changes brought about by Vishal Sikka will not be rolled back or lost with the exit of the CEO.Venkatesan was speaking at the press conference organized by the company to address wor...
FULL TEXT: Vishal Sikka’s resignation letter to Infosys board Vishal Sikka, the SAP-veteran who took over as the CEO of Infosys four years ago, has put in his papers after continuing differences of opinion with some of the key shareholders. He will, however, continue as the vice chairman of the company.He also wrote a long letter to the...
Indigo targets 20% growth every year; move towards owned aircraft IndiGo Airlines, India's largest airline by far, is in no mood to go easy on its rapid expansion in coming years, the company said.The company, which accounted for 85% of the total capacity added in the country in the last five years and grew its seats at 24% per year on aver...
IT companies using illegal tactics to force workers to resign: FITE The Forum for IT Employees, arguably the IT workers rights organization with the largest number of well-wishers and supporters, accused IT companies of using illegal and unethical means to force their workers to submit their resignations.In a meeting with Maharashtra Chief Mi...
Mahindra Finance to raise Rs 2,000 cr via debentures Non-banking financial services company Mahindra & Mahindra Financial Services said it plans to raise Rs 2,000 cr by issuing debt instruments to the public.The non-convertible debenture issue will open on July 10.The NCDs carry a rating of IND AAA from India Ratings and BW...
Wipro opens Artificial Intelligence research facility in Israel University IT and outsourcing services provider Wipro said it will use students at Israel's largest university to jointly conduct research into artificial intelligence.The company inked an agreement with Tel Aviv University, Israel's largest institution of higher learning which is home ...
Former HUL Vice Chairman joins Infosys board Infosys said it appointed Unilever veteran D Sundaram as an independent director.He is currently the Vice Chairman and MD of TVS Capital Funds Ltd."He joined Unilever Group in 1975 and served in various leadership capacities in Unilever Group in a career spanning over 34 ...
Vishal Sikka says Infosys trying to retrain employees displaced by automation Infosys Chief Executive Officer Vishal Sikka said his company was not overwhelmed by the problem of automation and that it is trying to retrain its staff displaced by automation.Sikka was responding to a question on 'what happened to the 11,000 employees' displaced by automat...
IT woes to bring down real estate rentals in Bangalore, IT hubs With IT sector witnessing subdued sentiment amidst pressure on hiring and annual pay rise for employees, the country's software and services hubs such as Bengaluru, Hyderabad, Chennai, Pune and Noida-Gurgaon in NCR are expected to see 10-20 per cent reduction in the housing rents...
Are ‘truly free’ demat and trading accounts here in India with Finvasia? Finvasia, a technology-driven online broking start-up, announced that it has rolled out what it claimed was India's first 'truly' free online demat account for investing in stocks and derivatives, including futures.There have been many 'free demat account' providers in the p...
Infosys denies promoter stake sale plans Infosys CEO Vishal SikkaIT services player Infosys again clarified that its promoters had no plans to bring down their stake in the company."Infosys would like clarify reports in the media speculating on plans of stake sale by the promoters," the company said in response...
TCS to create apps on Siemen’s IoT platform MindSphere Tata Consultancy Services said it will create applications on MindSphere, the cloud-based, open IoT operating system from Siemens.TCS CEO Rajesh GopinathanIoT stands for 'Internet of Things' and refers to connectivity between two machines over the Internet, with zero h...
Tech Mahindra net profit down 31% due to rupee, poor growth Tech Mahindra said its revenue fell 0.8% quarter on quarter in the three months ended March to Rs 7,495 crore, while net profit fell 31% to Rs 588 cr.In dollar terms, revenue rose 1.3% quarter on quarter and in constant currency terms, it was up 0.9% QoQ.In dollar ter...
SpiceJet introduces self check-in for baggage in Mumbai SpiceJet has introduced self check-in for baggage at Mumbai’s Chhatrapati Shivaji domestic airport.Customers flying with SpiceJet can now simply check-in their baggage at the self-service kiosks themselves up to 45 minutes prior to the departure time."Independent of...
TCS opens drone facility in the US Tata Consultancy Services said it has opened its first research lab for drones in the US at its Seven Hills Park Innovation Center located in Cincinnati, Ohio.The lab will address the rapidly expanding demand for unmanned aerial vehicles and business Solutions across industr...
Wipro rebrands itself, reveals new logo Outsourced services provider Wipro Ltd said it was undergoing a rebranding to reflect its evolving business."The new brand identity signifies a higher level of engagement and brand permission that helps clients leverage Wipro’s expertise to address their business requirement...
Glaucus questions stock price of Hong Kong-listed Fullshare Holdings Ltd Glaucus Research Group, a California-based short seller, said it was selling Hong Kong-listed developer Fullshare Holdings due to peculiar trading patterns seen in the stock's counter."Fullshare is supposedly a commercial and residential property developer, but this business ...
WATCH LIVE – Moving towards a less visa-dependent model : TCS New TCS CEO Rajesh GopinathanTata Consultancy Services has reported Q4 revenue of Rs 29,642 cr, a decline of 0.3%, and said his company will wait and see about new US visa regulations that are scheduled to come out today.NEW VISA RULESOn new visa regulations expected...
We expected better numbers: Vishal Sikka of Infosys Infosys Chief Executive Officer Vishal Sikka said the company's performance in the January-March period was below his expectations for various reasons."It is a challenging performance," Sikka said in a post-result press conference. "We were expecting a higher number," sai...
Infosys guides for FY18 growth of 6.5-8.5% in constant currency Infosys Q4 resultsInfosys Ltd said it expects its revenue to grow by a modest 6.5-8.5%, stripped off the impact of currency movements, in the year that started this month.The street was expecting a guidance of 7-9% growth.The guidance is well below the traditional gu...
US Fed unlikely to reverse quantitative easing this year: HDFC Securities US Federal Reserve BuildingBroking and financial firm HDFC Securities Ltd said it does not expect the US Federal Reserve to start sucking out the liquidity that it has infused into the global financial market in the last nine years any time soon.The comments came in the ...
Administrative charges on employee provident fund cut to 0.65% from 0.85% After keeping the move on hold for three months due to the elections, the Employees' Provident Fund Organization has cut its administrative charges on the funds it manages to 0.65% from 0.85%, according to labor ministry sources.The cut in administrative charges -- which was ...
Vodafone Idea merger to save Rs 7,000 cr per year; one-time cost Rs 3,000 cr The Idea Cellular-Vodafone merger announced today will save about Rs 14,000 cr in operating expenses per year for the combined entity after four years of merger, the two companies said.However, due to the applicability of spectrum caps on the combined entity, the deal will al...
Vodafone merger values Idea at Rs 109.76 per share The merger deal between Idea Cellular and Vodafone India values equity shares of the Aditya Birla Group company at about Rs 109.76 at the time of completion of the merger, 2% below its present trading value.According to the terms of the contract, when the merger of Vodafone I...