Macquarie has picked its most preferred stocks in the Indian midcap IT space and initiated ‘outperform’ ratings on six such Indian IT companies, pegging upsides of up to 108% on these stocks from their closing prices on Friday.
The global brokerage considers digital transformation as a multi-year growth driver for the said industry, adding certain parameters for measurement of offshore execution and added dimensions so as to check client concentration and vertical concentration, it noted.
The brokerage’s top pick is the Pune-based Persistent Systems (NS:PERS), for which it sees broad-based growth drivers that have helped deliver superior growth despite a drag from the top five clients. Initiating an outperform rating on the stock, Macquarie has set a target price of Rs 8,330/share on Persistent, which is a 107.8% upside from Friday’s closing price.
Its second top pick is LTIMindtree (NS:LTIM), which it terms a ‘safe choice’, given a much-lower business risk compared to LTI and Mindtree (NS:MINT) individually, along with broader exposure to verticals and better scale than Persistent. A target price of Rs 7,540/share is set, an upside of 75.8%.
Coforge (NS:COFO) and Birlasoft (NS:BIRS) are Macquarie’s next two ‘outperform’ rated picks from the midcap IT sector with target prices of Rs 6,260 (61.2% upside) and Rs 500 (70.2% upside), respectively.
Coforge has good exposure to mid-sized US banks, driving growth, while Brilasoft’s offshore delivery capability and mega deals record serve as key positives.
The brokerage firm also lists Mastek (NS:MAST) and L&T Technology Services (NS:LTEH) among its top 6 IT picks in the space with target prices of Rs 2,720 (58.6% upside) and Rs 4,630 (34.25% upside), respectively.
Macquarie has also set a ‘Neutral’ coverage on Mphasis (NS:MBFL) with a target price of Rs 1880/share, which is a downside of 7.9% compared to Friday’s close.