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Business News/ Markets / Stock Markets/  TCS vs Infosys vs Wipro: Which stock should you buy after Q4 results? Here's what experts say
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TCS vs Infosys vs Wipro: Which stock should you buy after Q4 results? Here's what experts say

TCS, Infosys and Wipro have announced their Q4 numbers so far. TCS and Infosys reported strong deal wins while Wipro continues to see demand environment uncertainty.

TCS, Infosys and Wipro have announced broadly in-line Q4 numbers. AFP PHOTO/Ralphson DAVID (AFP)Premium
TCS, Infosys and Wipro have announced broadly in-line Q4 numbers. AFP PHOTO/Ralphson DAVID (AFP)

Three major Indian IT companies - TCS, Infosys and Wipro - have announced their Q4 numbers so far. TCS and Infosys reported strong deal wins while Wipro continues to see demand environment uncertainty.

TCS' consolidated revenue from operations rose 3.5 per cent year-on-year (YoY) and 1.1 per cent quarter-on-quarter (QoQ) to 61,237 crore for the fourth quarter of FY24. Revenue in constant currency (CC) terms rose 2.2 per cent YoY.

Its consolidated net profit for the quarter stood at 12,434 crore, up 9.1 per cent YoY and 12.4 per cent QoQ.

The company's operating margin in Q4 saw an increase of 150 bps YoY to 26 per cent while the net margin saw an expansion of 100 bps YoY to 20.3 per cent.

Also Read: TCS Q4 result: Revenue up 4%, profit rises 9% YoY; top 5 highlights from March quarter scorecard

Infosys reported a 30 per cent YoY rise in net profit of 7,975 crore for Q4FY24 against a profit of 6,134 crore in the same quarter last year. The company's revenues in constant currency (CC) terms remained flat YoY and declined by 2.2 per cent QoQ. The company's operating margin declined 0.9 per cent YoY and 0.4 per cent QoQ.

Also Read: Infosys Q4 result: Net profit jumps, attrition rate declined; top 5 highlights of Infosys Q4 earnings

Wipro's consolidated net profit declined 8 per cent to 2,835 crore. Revenue from operations dropped 4 per cent YoY to 22,208.3 crore.

Also Read: Wipro Q4 Results: Large TCV up 9.5% YoY, Q1FY25 revenue guidance pegged at -1.5 to 0.5%; 5 key highlights

What should investors do?

The majority of experts Mint talked to, prefer TCS to the other two stocks. They underscored TCS performed better than its peers in the recent challenging times. While TCS' management is confident about the new financial year, Infosys and Wipro have given unimpressive guidance for the near future.

Also Read: Mint Primer | Let the good times roll: IT services eye a better future

Sanjeev Hota, Head of Research at Sharekhan by BNP Paribas observed among the tier-1 IT service companies, TCS reported a decent Q4 with stable management commentary despite the challenging environment while Infosys reported weaker numbers and lower-than-expected guidance for FY25.

Deal win momentum was strong across IT services companies which declared the results with record deal win TCV for TCS. TCS’s management commentary was stable and is confident of a better FY25 versus FY24 unlike its peers (Infosys and Wipro) whose weaker-than-expected guidance reflects continuity of weakness and challenges in the near to medium term, Hota pointed out.

"Our top pick would be TCS among tier-1 IT services companies, given the decent Q4, strongest deal win momentum and relatively encouraging outlook for FY25 compared to its peers. TCS has greater bandwidth to stay resilient in this challenging environment. Our pecking order among tier-1 companies is TCS followed by Infosys," said Hota.

Pravesh Gour, Senior Technical Analyst, Swastika Investmart, observed that TCS beat its competitors in Q4 financial figures. Infosys and Wipro's finances were weak and they were unable to guarantee a timely ramp-up of deals.

"In a difficult business climate, TCS has proven to be the most robust. The Tata Group company's strong development in regional markets and multi-year high pipeline of new deals allowed it to surpass Infosys and Wipro. Upon examining the outcomes of the top three IT services companies, it is evident that TCS is prioritizing efficiency and boosting utilisation to achieve larger margins in a demanding demand market," Gour said.

Dhruv Mudaraddi, a research analyst at Stoxbox is positive about TCS.

He said financials for Infosys and Wipro were weak as the companies were not able to ensure timely ramp-up of deals and fell prey to indecisive and subdued discretionary spending. TCS, however, was able to continue banking on its megadeals for healthy billing and was also able to ensure that its new deal pipeline continued to grow to multi-year highs.

"One can notice a clear focus on efficiency and increasing utilization to subsequently realize higher margins in a challenging demand environment where discretionary spending has been on a decline and TCS has been able to do this best which is reflected by their strong margin expansion even on a high base. Based on these positives we expect TCS to perform the best among the three companies and would recommend investors add TCS to their portfolios," said Mudaraddi.

Amit Goel, Co-Founder and Chief Global Strategist at Pace 360 said TCS has demonstrated the highest resilience in a demanding commercial climate.

"With a multi-year high new deal pipeline and robust growth in regional markets, the Tata Group firm has outperformed Infosys and Wipro. We recommend investors buy TCS for the next year," said Goel.

Also Read: Wipro, Infosys March quarter results paint gloomy outlook for FY25

On the other hand, CA Vatsal Vinchhi, Equity Analyst - IT sector, Choice Equity Broking said among top players, Infosys commands a larger portion of revenue derived from discretionary spending, indicating potential for upward growth. Additionally, in terms of valuation, Infosys appears more attractively priced than counterparts like TCS and Wipro.

"While TCS is currently trading above its five-year PE ratio, Infosys is trading below it. Hence, in my view, on recovery of demand, Infosys shall be more beneficial," said Vinchhi.

Read all market-related news here

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 22 Apr 2024, 02:38 PM IST
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