Q3 Review: Are HCLTech and Wipro better bets as compared to Infosys and TCS?

IT shares today: The information technology (IT) space is buzzing after Indian IT majors Tata Consultancy Services (TCS), Infosys, Wipro, and HCL Technologies announced their Q3 FY24 results.

In Monday's trade, the Nifty IT was up over 1 per cent with Wipro rising nearly 6 per cent, Infosys up over 2 per cent, HCLTech over 3 per cent, and TCS with nearly half a per cent gain.

According to Dr. V K Vijayakumar, Chief Investment Strategist, at Geojit Financial Services, the rally in the market, primarily driven by momentum, is now getting support from fundamentals.

Dr. Vijayakumar, while emphasising the IT sector, said that the sharp bounce in large-cap IT stocks on the back of slightly positive management commentary indicates that an underperforming segment can surprise on the upside on news of a turnaround in the sector.
 

TCS vs Infosys vs Wipro vs HCLTech: Q3 performance 

HCLTech posted a 6.2 per cent increase in consolidated net profit to Rs 4,350 crore, the highest ever on a quarterly basis. The consolidated revenue of HCLTech grew 6.5 per cent to Rs 28,446 crore during the reported quarter from Rs 26,700 crore in the year-ago period.

Likewise, Tata Consultancy Services (TCS) reported a net profit or profit after tax (PAT) of Rs 11,058 crore for the quarter ended December 31, 2023 (Q3 FY24), a rise of 1.95 per cent year-on-year (YoY). Revenue from operations stood at Rs 60,583 crore, up 4.04 per cent YoY.

Meanwhile, Infosys reported a PAT of Rs 6,106 crore for the third quarter, a drop of 1.7 per cent sequentially and 7.3 per cent YoY. The company's revenues from operations for the third quarter of the current financial year (Q3 FY24) came in at Rs 38,821 crore, down 0.4 per cent QoQ and up 1.3 per cent YoY.

Similarly, Wipro also posted an 11.74 per cent decline in its consolidated net profit to Rs 2,694.2 crore for the quarter under review, against Rs 3,052.9 crore in the year-ago period. The consolidated revenue from operations of Wipro also fell 4.4 per cent to Rs 22,205.1 crore during the December quarter as against Rs 23,229 crore a year ago.

Analysing the performance, Sonam Srivastava, Founder and Fund Manager at Wright Research, PMS, said TCS and Infosys have led the pack by showing resilience amid challenging global economic conditions.

Further, Srivastava said that Wipro and HCL Technologies, while facing similar macro challenges, have shown varying degrees of impact on their financial performance. HCL Technologies, meanwhile, is expected to mirror the sector's overall trends of cautious growth and margin pressures.

TCS vs Infosys vs Wipro vs HCLTech: What do analysts suggest?

Mohit Jain, Research Analyst at Anand Rathi Institutional Equities, believes that HCLTech and Wipro are better placed as compared to Infosys and TCS.

"We find HCLTech and Wipro better placed compared to the top two. HCLTech may deliver a better Q4 compared to the other three from a growth standpoint. And if they can win a couple of more large deals, the growth can accelerate further. We are also positive on the margin trajectory that the company can take, thereby exhibiting higher growth at the earnings level," said Anand Rathi Institutional Equities' Jain.

While keeping Wipro's performance in mind, Jain said the IT major may not be a growth leader but should turn positive in FY25, given total contract value (TCV) momentum. 

"The company also did remarkably well on margins last year, and if growth returns, we are looking at expansion there," the expert added.

Geojit Financial Services is bullish on HCLTech and Wipro as it sees more room on the upside in the stocks.

What lies ahead for the four IT majors?

Wright Research's Srivastava believes the commentaries from the leaders of TCS, Infosys, Wipro, and HCL Technologies paint a picture of resilience and strategic adaptation in the IT sector, crucial for investors considering IT stocks.

However, citing the risks, she said macroeconomic uncertainties can impact IT spending.

Srivastava added that the market, on the other hand, has reacted very positively to the muted earnings. This hints at the strong expectations that the market has for the IT sector to recover in the coming quarters. With this expectation in mind, IT could be a good value pick at these levels.

TCS vs Infosys vs Wipro vs HCLTech: Share price performance in a year 

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