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ICICI Securities Report
ICICI Securities prefers mid-caps over large-caps as it believes that mid-caps are better placed to quickly remodel their business and compete with incumbents in large multi-service line deals leveraging AI.
The brokerage upgrades Coforge (to Buy, from Hold) and Mphasis (to Buy, from Add), basis their attractive valuations and healthy revenue growth visibility showing in the resilient revenue growth momentum, deal bookings and management's commentary on deal pipeline. It also upgrades LTIMindtree (to Hold, from Reduce) on sharp correction in the stock price.
The brokerage retains Buy on Hexaware and LatentView.
Scenario analysis
ICICI Securities scenario analysis for FY27–28E industry revenue CAGR consists of three distinct revenue growth trajectories explained below.
Base case: In the base case scenario, the brokerage assume revenue growth for IT Services industry growth will likely be 3–5% YoY USD (vs long-term average of 7–8%), factoring in prolonged subdued growth.
Bull case: In bull case, it assumes a meaningful acceleration in enterprise AI adoption, lifting the IT Services industry's earnings growth to 9–10% by FY28E. The brokerage anticipates a significant upside in this scenario, factoring in an average 20% valuation re-rating as multiples return to pre-correction (FY25) levels. This recovery is driven by the industry finally capturing a higher share of incremental technology spend through high-value AI engagements.
Bear case: In bear case scenario, the brokerage assume further compression in industry revenue growth rate to 1–2% due to intensified AI-led deflation. In bear case scenario, large caps have higher downside risks, while the preferred picks – Coforge, Mphasis, Hexaware and LatentView have upside potential.
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