This preview shows page 1. Sign up to view the full content.
Unformatted text preview: g laggards, we continue to prefer Wipro to Infosys. We
believe the lopsided revenue growth profile of HCL Tech will pose growth
concerns; hence we reiterate our Sell on the stock.
TCS – continues to be our top pick and core holding in the sector
We believe TCS will be the biggest beneficiary of the overall improvement in IT
services spending in CY14E. In particular, advantages like: (a) diversified
geographical and vertical exposure, (b) a strategic vendor status with most of
its top customers and (c) share gains by displacing incumbent multinational
vendors should enable TCS to continue reporting sector-leading earnings
growth in our view. We expect the company to deliver earnings CAGR of 20%
over FY14–16E. Thus, despite a 63% outperformance vs. Sensex in CY13, we
reiterate Buy and our top pick status with a Street-high target price of
Tech Mahindra – ideal combination of aggression of TechM and Satyam’s
We believe that the merged entity has the ideal combination of the aggression
of Tech Mahindra (standalone) and Satyam’s relationships. In our view, a
strong balance sheet and extremely competitive pricing would enable the
merged entity to win market share. We expect the company to deliver earnings
CAGR of 14% over FY14–16E. Improved revenue outlook and undemanding
valuations make it a candidate for a P/E re-rating. We reiterate our Buy with a
target price of INR2,200. Deutsche Bank AG/Hong Kong Page 3 7 January 2014
Software & Services
Indian IT Services Wipro – we continue to prefer Wipro over Infosys on attractive valuations
We believe the improved IT spending outlook for CY14E should help laggards
such as Wipro and Infosys. Although we forecast both Wipro and Infosys to
report a 4–4.4% CAGR in USD revenue over FY15E, we maintain a positive bias
for Wipro over Infosys. We believe that despite our superior earnings growth
forecast (17.7% CAGR vs. 15.8% for Infosys over FY14–16E), Wipro is trading
at a ~12% discount to Infosys’ one-year forward P/E. As Wipr...
View Full Document
This document was uploaded on 02/06/2014.
- Spring '14