TCS pips Infosys as top IT pick after stellar results
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| Dr Sanjay Kumar Cardiac Cardiothoracic Heart Surgeon India |
Net profits for IT firms take a hit in the first quarter because of salary hikes. However, TCS reported profits equivalent to the fourth quarter of last fiscal (Q4 FY11) despite 12-14 per cent hike in salaries.
TCS' earnings were in contrast to Infosys' results. Infosys, for long the favourite among IT stocks, has floundered over the past two quarters. Analysts expect Infosys to beat its guidance quarter after quarter, something that the IT bellwether has not been able to execute in the last two quarters. The exit of some of the best known names from the company has also not gone down well with the investors' community.
So, while TCS has gained momentum steadily, Infosys has been lagging behind. TS Harihar of ICICI Securities said, "TCS and HCL Tech have outperformed Infosys and Wipro over the last few quarters and that trend is likely to continue."
Post results, Bank of America (BoA) has come out with an outperform rating on TCS with a price target of Rs1,400. "Stellar quarter, promising outlook… Robust, all round volume growth," that's how BoA described TCS' performance.
Citi has maintained its hold rating on the stock with target of Rs. 1,260. Citi said in its report that margins were slightly lower than expected but operating profits were in line.
Deutsche Bank maintained a buy target of Rs1,400. "June quarter results beat our and Street estimates... Demand environment continues to be robust," the Bank said in its report.
Maintaining equal weight, Morgan Stanley said as strong revenue growth on higher base could support TCS stock price.
Brokerage firm CLSA, however, said the stock is likely to under perform because it is highly valued. "Valuations at 21 times March '12 earnings are indicative of the Street's optimism... TCS has best credentials in the sector but already priced in the stock," the firm's report said.
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