Largecap IT stocks to buy now for an upside potential of up to 20%; Do you own any?

Nifty has declined over 15 percent from its peak in September last year, presenting investors with an opportunity to acquire fundamentally strong stocks at significant discounts in both price and valuation. Amid this market correction, Kotak Institutional Equities has issued a Buy recommendation on two robust companies, Tata Consultancy Services (TCS) and Tech Mahindra, highlighting their fall in valuations.

1. Tata Consultancy Services

With a market capitalization of Rs. 12,73,548 Crore, the stock of Tata Consultancy Services Limited opened 0.54 percent down from yesterday’s close of Rs. 3,493. Later it made a high of 3,551 up 1.66 percent. Additionally, the past one-year return for the stock is -13 percent and the 5-year return for the stock is 67 percent.

Kotak believes that the significant correction of 17 percent and 22 percent in the past six months has made the stock trade at the same valuations as when it was trading at the COVID levels of March 2020. The Stock is currently trading at a 23x forward multiple valuation. The brokerage sees this decline as an attractive investment opportunity and has given a price target of Rs.4,100 which is a 16 percent upside from the current levels.

The company reported a marginal increase of 5.59 percent YoY in revenue from operations to Rs. 60,583 Crore in Q3FY24 to Rs. 63,973 Crore in Q3FY25. On a QoQ basis, the company reported a marginal decrease of 0.44 percent in revenue from operations from Rs. 64,259 Crore in the previous quarter.

Their Net profit increased by 12.13 percent YoY from Rs. 11,097 Crore to Rs. 12,444 Crore for the same period. On a QoQ basis, the company reported an increase of 4.09 percent in Net profit from Rs. 11,955 Crore in the previous quarter

Tata Consultancy Services (TCS) is a leading global IT services, consulting, and business solutions company. As a part of the Tata Group, TCS has established itself as a pioneer in digital transformation, offering cutting-edge solutions in cloud computing, artificial intelligence, cybersecurity, and enterprise software development.

Also read: Fundamentally strong stock to buy now for an upside potential of over 60%; Do you own it?

2. Tech Mahindra

With a market capitalization of Rs. 1,46,485 Crore, the stock of Tech Mahindra  Limited opened 1.20 percent up from yesterday’s close of Rs. 1,493. Additionally, the past one year return for the stock is 17 percent and the 5-year return for the stock is an impressive 102 percent.

Kotak agrees with the company’s new management’s goal of improving their margins to 15 percent by FY27 and is also optimistic about the company’s ability to meet its current year’s margins target. The brokerage sees this decline as a turnaround play trading at reasonable valuations and has given a Price target of Rs. 1,800 that is 20.40 percent upside from current levels.

The company reported a marginal increase of 1.40 percent YoY in revenue from operations to Rs. 13,101 Crore in Q3FY24 to Rs. 13,285 Crore in Q3FY25. On a QoQ basis also, the company reported a marginal decrease of 0.21 percent in revenue from operations from Rs. 13,313 Crore in the previous quarter.

Their Net profit increased significantly by 88.74 percent YoY from Rs. 524 Crore to Rs. 989 Crore for the same period. On a QoQ basis also, the company reported a decrease of 25.64 percent in Net profit from Rs. 1,257.50 Crore in the previous quarter

Tech Mahindra is a leading global provider of IT services, digital transformation, and business process outsourcing solutions. As part of the Mahindra Group, the company specializes in helping businesses leverage emerging technologies such as artificial intelligence, cloud computing, cybersecurity, and blockchain to drive innovation and efficiency.

Written By Abhishek Das

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