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information technology | IST

IT sector Q2FY22 preview: Sector poised for strong Q2 earnings; Prefer HCL Tech over Infosys, says Edelweiss

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The slowest growth in tier-I companies is expected to be 4 percent and that is by HCL Technologies, which is rebounding after a weak Q1.

Earnings of the IT sector will kickstart from Friday with bellwether Tata Consultancy Services (TCS) announcing its Q2 results on Friday. Overall, the IT companies are expected to be exceptionally strong in the second quarter of the financial year 2021-22, perhaps the best Q2 in a decade.
Sandip Agarwal, research analyst-institutional equities at Edelweiss Securities,  spoke to CNBC-TV18 ahead of the TCS and other IT company's results. Agarwal said the brokerage prefers HCL Technologies over Infosys.
The slowest growth in tier-I companies is expected to be 4 percent and that is by HCL Technologies, which is rebounding after a weak Q1. The highest growth is going to come in from Infosys on an organic basis. Wipro’s dollar revenue growth stands at 6.5 percent. In constant currency terms, it should be a growth of nearly 7 percent, which is at the upper end of what the company guided, but Wipro’s growth is going to be aided by acquisitions. Infosys growth is expected to be organic.
“We have put HCL Tech above Infosys because we have a strong view on the cloud side versus digital; digital will also grow equally strong but cloud will be much stronger, going forward, with spend on IP Multimedia Subsystem (IMS), on cloud side will happen and that’s why we have promoted HCL Tech as a top pick, 5-6 months back, followed by Infosys, TCS in the large cap space,” Agarwal said.
On midcap IT, he said, “We believe Mindtree and Larsen & Toubro Infotech (LTI) will create equal value as Infosys and TCS has in the next 10 years. Therefore, we are bullish on Mindtree, LTI, L&T Technology Services (LTTS), Coforge and smallcaps like Birlasoft, Zensar Technologies, Firstsource Solutions.”
Also, watch the accompanying video of CNBC-TV18’s Reema Tendulkar to get a handle on the Q2 expectations from the IT sector in earnings special — Quarter Se Quarter Tak (QSQT).