Reviews

Published: Oct 16, 2023
Updated: Oct 16, 2023

Analyzing India's Leading IT Majors post Q2 Result : TCS, Infosys, and HCL Tech

The three IT giants, Tata Consultancy Services (TCS), Infosys, and HCL Technologies (HCL Tech), recently revealed their Q2 earnings, sparking discussions about which among them offers the most promising long-term prospects. This analysis explores their stock performance, recent earnings, and expert insights.

Stock Performance Trends:

In the year-to-date (YTD) performance, Nifty IT outpaced the Nifty index, demonstrating a remarkable turnaround after underperforming by 30 percent in 2022. The IT index surged over 12 percent in 2023 compared to a 9 percent increase in the benchmark Nifty.

1-Year Performance:

HCL Tech led the pack, with a 25 percent increase, followed by TCS at 14 percent, while Infosys lagged with just a 2 percent gain. The YTD trend also mirrored this performance, with HCL Tech gaining 18 percent, TCS rising by 9 percent, and Infosys experiencing a 4 percent dip in 2023.

Performance After Q2 Results:

Post-Q2 earnings, TCS and Infosys saw a decline of 1.8 percent and 2.6 percent, respectively, while HCL Tech managed to stay in the green, recording a 2 percent gain. In the first ten months of 2023, Infosys and HCL Tech showed positive returns in 6 months and losses in 4, while TCS stayed in the green for 7 of the 10 months.

Monthly Performance Highlights:

The monthly performance varied, with Infosys gaining the most in July, up 6 percent, and HCL Tech leading in May with a 7.6 percent gain. TCS topped the charts in January with a 5.2 percent increase but experienced the most significant loss in March, down 3.2 percent.

Long-Term Performance:

Over a 3-year period, HCL Tech remained the top performer, rising by 37 percent, while Infosys and TCS both posted gains of 25 percent.

Earnings Review:

All three companies reported decent earnings for the September quarter.

TCS:

TCS reported a 9 percent increase in net profit to ₹11,342 crore compared to the same period last year. Revenue from operations rose 7.9 percent to ₹59,692 crore, beating profit expectations but missing revenue estimates. The company maintained its guidance.

Infosys:

Infosys reported a 3 percent YoY rise in net profit at ₹6,212 crore in Q2FY24, with a 7 percent growth in consolidated revenue. The company revised its revenue growth guidance for the full year but retained its operating margin guidance.

HCL Tech:

HCL Tech posted a 10 percent YoY growth in consolidated net profit at ₹3,832 crore for the September quarter. Its revenue from operations also rose 8 percent, with a lowered FY24 revenue growth guidance.

Expert Insights:

Analysts hold diverse opinions on which IT major is the best choice for long-term growth. Some favor TCS due to its leadership, financial strength, large client base, and strong order book. Others prefer HCL Tech because of its revenue growth backed by solid deal wins and lower exposure to certain sectors. Infosys also has its proponents, with expectations of fresh lifetime highs in the next two years.

Each of the three IT giants has unique strengths and performance trends. Investors should consider their individual investment strategies and long-term goals when choosing among TCS, Infosys, and HCL Tech for their portfolios.