Morgan Stanley raises Infosys, TCS, HCL Tech target prices; check the ratings

The global brokerage firm foresees high long term revenue growth and margin improvement for TCS, Infosys and HCL Tech and other IT firms

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Morgan Stanley has raised the target prices of top and mid-tier Indian IT company stocks including TCS, Infosys and HCL Tech while maintaining largely favourable ratings.

The brokerage firm cited expectations of robust FY25 revenue growth, margin improvement and double-digit EPS growth for raising the target.

Morgan Stanley attributed the optimistic revenue growth forecasts for FY25 to stabilising macro risks, the levelling off hyper-scale revenue growth, an anticipated rebound in BFSI (banking, financial services and insurance) spending in CY24, announcements of significant deal wins and robust order bookings in the second quarter of FY24.

Morgan Stanley ratings 

Maintains “overweight”:

TCS

Infosys

HCL Tech

LTI Mindtree

Maintains “equal weight”:

Mphasis

Maintains “underweight””

Wipro

L&T Tech

Tata Elxsi

It has upgraded from “equal weight” to “overweight” Cyient because of EPS upgrades driven by strong margins and modest expectations for revenue growth.

It had downgraded from “equal weight” to “underweight” Tech Mahindra, saying the period of strong outperformance has ended and over concerns about potential downward pressure on EPS.

“We have revised our price targets up by 11-29%, led by roll forward, lower probability of bear case, and higher probability of bull case, and increased long-term earnings. We have raised our margin assumptions for ER&D names, while our revenue growth assumptions remain largely unchanged, except for Wipro and Mphasis (numbers lowered),” the firm said in a note.

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The brokerage expects the current P/E valuation, similar to the 5-year average, to persist due to projected double-digit EPS growth in FY25 and relatively low ownership by both domestic and foreign institutional investors, although ownership is gradually increasing.

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