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TCS to Infosys and Wipro — IT margins in focus with target cuts ahead of results

Citi Research forecasts an 8% growth in the fourth quarter of financial year 2024 for the big five information technology companies, with a focus on higher competition and a pivot towards large deals.

Margin trajectory—given limited levers and higher competition—will be the focus of the upcoming results, it said in a report dated April 1. Whether the pace of recovery could be slower than anticipated needs to be monitored, the note said.

While the total contract value and pricing trends need to be monitored, the consensus is expecting about 8% growth for the top five IT firms, the note said. “Consensus is expecting margins to improve by 90 bps.”

In the March quarter, Citi expects the constant-currency revenue growth of (-)1.4% to (+)1.2% quarter-on-quarter for the top five companies despite the reversal of furloughs. The focus is likely to be on Infosys and HCLTech’s revenue guidance in the new fiscal and qualitative commentary from Tata Consultancy Services Ltd.

The brokerage has revised down the target prices of most IT firms. It has given a ‘neutral’ rating to Infosys Ltd. and HCL Technologies Ltd., while the rest are rated ‘sell’.

With its global peers having guided muted 2024 growth and hoping for a recovery in the second half, the brokerage expects a similar trend for Indian IT. NDTV Profit

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