Citi has raised its price targets on Wipro, Tata Consultancy Services (TCS), and HCL Technologies, but has retained its Sell ratings on all three stocks, pointing to limited earnings growth over the next few years. The brokerage's revised targets reflect a broader rerating of the Indian IT sector, rather than a significant improvement in its earnings outlook.
The brokerage has increased its target price on Wipro to Rs 170 from Rs 145, on TCS to Rs 2,000 from Rs 1,840, and on HCL Technologies to Rs 1,200 from Rs 1,050. However, its earnings estimates for these companies have remained largely unchanged, with only marginal revisions to account for currency movements and operating assumptions.
Higher Valuations, But Limited Earnings Momentum
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For Wipro, Citi has raised its target price-to-earnings multiple to 13 times from 11 times following the IT sector rerating. However, it expects the company's earnings per share to grow by only around 2% annually through FY29. The brokerage has revised its FY27–29 earnings estimates by less than 1%, indicating that its assessment of Wipro's earnings prospects remains largely unchanged.
Similarly, for TCS, Citi has increased the target P/E multiple to 13 times from 12 times, while raising its target price to Rs 2,000 from Rs 1,840. Despite the higher valuation, the brokerage expects EPS growth to moderate to 2% to 3% annually in FY28–29.
For HCL Technologies, the target P/E multiple has been increased to 16 times from 14 times, taking the price target to Rs 1,200 from Rs 1,050. However, Citi expects EPS growth to slow sharply from 15% in FY27 to 2% in FY28 and 1% in FY29. Its FY27–29 earnings estimates have remained largely unchanged after currency and operating adjustments.
The common thread across the three companies is that the higher price targets largely reflect an improvement in valuation assumptions, rather than stronger earnings expectations.
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Citi Sees Similar Challenges Across IT Stocks
Citi's cautious stance extends beyond the three large IT companies. It has maintained a Neutral rating on Infosys with a target price of Rs 1,105, retaining its target P/E multiple at 14 times. The brokerage expects the company's EPS growth to moderate from 7.8% in FY27 to 2.3% in FY28 and just 0.6% in FY29.
Among mid-cap IT companies, Citi has retained Sell ratings on Coforge and Persistent Systems, despite raising their target prices to Rs 1,820 and Rs 5,035, from Rs 1,750 and Rs 4,570, respectively. It expects revenue growth at Coforge to moderate from 50.7% in FY27 to 12.1% in FY28, while Persistent Systems' revenue growth is projected to slow from 27.4% to 13.6% over the same period.
The brokerage has also raised its target prices on Tech Mahindra, LTM, and L&T Technology Services, while retaining Sell ratings. Its assessment points to moderating earnings growth across these companies, even as some are expected to see improvements in operating margins.
For Hexaware Technologies, however, the brokerage cut the target price to Rs 470 from Rs 475 while retaining its Sell rating and target P/E multiple of 18 times.
Overall, Citi's latest assessment suggests that the IT sector's valuation recovery has prompted higher price targets across several stocks, but the brokerage continues to see limited earnings momentum as a key concern.
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