Infosys (NS:INFY): Infosys (INFO) delivered a strong Q2 top-line leading to the anticipated guidance increase for FY25E. INFO outperformed peers in Q2FY25 on anticipated lines (Infosys update: On your marks, get set…), driven by improved demand in BFSI (seven large deals) and an uptick in short-cycle/small to mid-sized deals. Management commentary pointed to a stable demand environment and an uptick in discretionary in parts of the BFSI vertical. Revenue guidance was raised to 3.75% to 4.50% CC for FY25E following the quarter's 3.1% QoQ CC revenue growth. The pockets of weakness were in lower large deal wins including net new large deal wins and the postponement of the wage hike cycle to Q4/Q1. Our revenue growth estimates for FY24-27E assume a similar incremental annual growth rate as the last five years' average. The recent re-rating of valuation multiples is ‘partially’ priced in these positives. We maintain our ADD rating on Infosys with a target price of INR 2,010, based on 25x Dec-26E EPS.
Axis Bank (NS:AXBK): Axis Bank (AXSB) beat estimates, largely on account of higher recoveries from written-off accounts and higher MTM gains, offset by soft growth on both sides of the balance sheet, and continued stress in unsecured retail credit. The bank wrote back excess tax provisions owing to a favourable IT order, offset by an increase in prudent provisions. Deposit growth (+2.3% QoQ) appears below the industry with the CASA ratio also declining to 40.6% (-125 bps QoQ). While AXSB has been leaning towards enhancing the quality of its deposit franchise, the LCR deteriorated to 115% as the bank aligned itself with best practices on LCR reporting. The loan-to-deposit ratio stayed elevated at 92% despite modest loan growth (+2.0% QoQ). We argue that AXSB faces a steep balancing act in overcoming its deposit handicap, while also managing growth, given continued elevated stress in unsecured retail segments. We maintain ADD with a revised TP of INR1,250 (standalone bank at 1.7x Sep-26 ABVPS).
Wipro (NS:WIPR): Wipro’s (WPRO) revenue improvement in Q2 was offset by the soft outlook for Q3FY25E (-2 to 0% QoQ CC) which reflects the historical volatility. WPRO’s small & mid-sized deal wins were near the lows (-17% YoY and -3% QoQ), which contrasts with its peer Infosys’ commentary of >10% QoQ in its sub-USD 50mn deal wins. This can perhaps be attributable to the renewal cycle and/or weakness in its E&U and Manufacturing verticals. Key positives for WPRO include (1) large deal (USD 30mn+ TCV) bookings of USD 1.49bn in Q2 up 17% YoY and (2) strong growth in BFSI vertical (best in last eight quarters), supported by Capco. While Wipro has been consistent in strong cash generation at ~5% FCF yield, sub-par return metrics and historical volatility in earnings will keep the valuations at a discount. Maintain REDUCE with TP at INR 500, based on 19x Dec-26E EPS.
LTIMindtree (NS:LTIM): LTIMindtree delivered a healthy Q2, supported by strong growth in the BFSI vertical (a common feature across the industry) and continued client mining (growth across all top accounts). While the deal TCV remained flat YoY at USD 2.7bn in H1FY25, the overall large deal pipeline continues to remain strong at USD 5bn. LTIM management remained confident about sustainable momentum in the BFSI and Manufacturing verticals with several deals in the pipeline. Prominent growth drivers include mainframe modernization opportunities in BFSI supported by GenAI, AI embedded in deals, vendor consolidation and ERP modernization, especially in SAP/S4HANA. However, the management remains cautiously optimistic due to challenges of furloughs, lower working days, select clients in travel, macro uncertainties and wage hike impact in Q3FY25E. Maintain ADD on LTIM with a TP of INR 6,435, based on 27x Dec-26E EPS. The absolute upside return potential is diminished, following the sharp move in the last 3M/6M.
Mphasis (NS:MBFL): Mphasis posted strong revenue growth and in-line operating performance. The uptick in T-1 client growth and an uptick in the BFSI pipeline is the biggest positive – from the pipeline growing 19% in Q4FY24, it’s gone up 43% YoY in Q2FY25, driven by consolidation opportunities and partly supported by softer bookings in Q2. Importantly, 35% of the pipeline is AI-led as the company leverages AI for modernisation programs. However, the lengthened decision-making cycle for transformation deals may keep the disconnect between pipeline/bookings/revenue growth. The number of large deal wins has moderated as compared to the prior period run-rate (11 USD 20mn+ TCV deals over the past year as compared to 29 deals in the prior two-year period). Management reiterated its FY25E revenue outlook of ‘better than industry growth’, EBIT margin may have an upward bias within the band of 14.6 to 16.0%. Risk-reward is unfavourable with valuations at 29x FY26E. Maintain REDUCE on Mphasis with a TP of INR 2,865, based on 24x Dec-26E EPS.
Karur Vysya Bank (NS:KARU): Karur Vysya Bank (KVB) marginally beat estimates, benefitting from a strong operating performance, partly offset by a moderate rise in credit costs. Loan growth (+14% YoY) was driven by core segments: MSME (+22% YoY) and gold loans (+31% YoY) alongside strong traction in the LAP portfolio (~42% YoY). KVB continues to de-grow its corporate book and cut lower-yielding exposures. Deposit growth hugged loan growth (+15%+ YoY), with the CASA ratio further declining to 29.5% (-91bps QoQ), in line with industry trends. While we expect adverse impact on NIMs from incrementally higher cost of deposits, and likely rate cuts during H2FY25, we also build in incremental efficiency gains, which are likely to help sustain RoAs at current levels. We continue to be constructive on KVB on the back of its consistent performance, and a granular portfolio, we maintain ADD with a revised TP of INR240 (1.5x Sep-26 ABVPS).
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