Reliance Industries (NS:RELI): Our ADD rating on Reliance Industries (RIL) with a price target of INR 1,670/sh is premised on (1) recovery in the O2C margins, (2) EBITDA growth in the digital business, driven by improvement in ARPU, subscriber addition, and new revenue streams, and (3) potential for further value unlocking in the digital and retail businesses. RIL’s consolidated Q3FY25 EBITDA stood at INR 438bn (+7.7% YoY, +12.1% QoQ) and APAT at INR 219bn (+11.7% YoY, +13.5% QoQ), ahead of our estimate, led by sequential improvement in O2C margins, improving ARPU, higher JioAirFiber connections and improved retail business performance.
Infosys (NS:INFY): Infosys’ (INFO) revenue beat in Q3 was aided by higher third-party/pass-through component and the guidance improvement was on expected lines (implying similar organic ask as HCLT (NS:HCLT)). The deal booking run-rate remains low, but adequate for growth acceleration in FY26E. While INFO’s YoY revenue growth eclipsed TCS (NS:TCS) after nearly eight quarters, both companies’ growth has been supported by higher software/hardware costs with ~70% of growth for TCS and 30% of growth for INFO linked to mega deals of the past. The quality of revenue may improve, as the dependence on mega deals reduces ahead with improvement in discretionary spending. Some of the negatives were steep decline in T5 (while T6-25 improved) which were linked to furloughs, cross-currency and perhaps productivity benefits. The lead-lag between passing of productivity benefits and recouping additional volumes can become systemic, particularly with outsized clients/logos in the sector. The low volume growth seen in 9MFY25 perhaps reflects this dynamic. We have moderated our estimates to factor in a higher pass-through rate, reflected in the competitive environment. Maintain ADD on INFO with a TP of INR 2,015, based on 25x FY27E EPS.
Axis Bank (NS:AXBK): Axis Bank’s (AXSB) Q3FY25 earnings print was in line with estimates, with soft growth on both sides of the balance sheet, muted fee income owing to lower volumes and continued stress in unsecured retail credit, partly offset by lumpy recoveries from written-off accounts. The bank continues to witness elevated stress in its unsecured retail book, primarily from the PL and CC portfolios. Deposit growth (+0.8%/9.1% QoQ/YoY) continues to print softer-than-industry with the CASA ratio deteriorating to 39.5% (-109 bps QoQ). While AXSB continues to bridge the quality gap of its deposit franchise compared to its peers, the loan-to-deposit ratio (LDR) remains elevated despite modest loan growth (+1.5% QoQ). AXSB faces a difficult balancing act in overcoming its deposit handicap, especially given the liquidity environment and continued elevated stress in unsecured retail pools. We cut our FY26/27 EPS estimates by ~5%, factoring in lower growth and elevated credit costs, maintain ADD with a revised TP of INR1,190 (standalone bank at 1.6x Sep-26 ABVPS).
LTIMindtree (NS:LTIM): Key positives include: (1) deal bookings of USD 1.68bn in TCV, up 30% YoY, with higher renewals in BFSI, driven by seasonality, (2) strong BFSI growth (36% of revenue) and commentary of sustaining the momentum in Q4, and (3) steady growth in T6-40 accounts cohort. Negatives include a steep decline in tech vertical linked to the T1 account decline (mid-teen decline estimated). The push for AI-driven productivity benefits mirrors past cloud-related revenue cannibalization (a decade ago). Employee intake (gross and net) remained unchanged from the previous quarter, with some moderation in utilisation, suggesting increased vulnerability in the onsite workforce as productivity benefits are passed on. Additionally, the margin improvement goalpost seems to be pushed further out, with increase in the pass-through component and greater reliance on low-margin segments for growth. Maintain ADD on LTIM on a lowered TP of INR 6,300, based on 27x FY27E EPS.
Mastek (NS:MAST): Mastek reported in-line revenue and margins for the quarter. The revenue growth was muted at 0.1% QoQ CC due to furloughs and margins were impacted by a wage hike. The UK and the US revenues were flat due to furlough impact while ME was under stress due to tail account rationalisation. The growth outlook for the UK is improving, led by better traction in both UK government and UK private sector. The new government is spending in areas like defence and healthcare. Mastek has won a USD 40mn deal from an existing client which includes ~25% net-net component. They have also entered a new UK government department, which is among the top spenders. The UK NHS has revived which is driving growth in the healthcare vertical (+32% YoY). The 12-month order book at USD 250mn was flat QoQ CC as the large deal is not a part of the orderbook. The US growth will revive led by net new deals, focus on managed services deals, and continued investments in areas like Oracle (NYSE:ORCL), Salesforce, and Data. The margins during the quarter dipped 32bps QoQ due to wage hike, furloughs impact and restructuring in the Middle East. The company expects margin to be at ~17% and US margins will reach mid-teens in FY26E. The overall growth outlook remains positive and will be driven by UK geography but focus on large deal limits scope for margin expansion. We maintain our revenue estimate and cut EPS estimate by ~2% for FY27E. We maintain our ADD rating with a TP of INR 3,850, based on 24x FY27E EPS. The stock is trading at P/E of 21/17x based on FY26/27E EPS.
Click on the PDF to read the full report: