TCS shares vs. Infosys? What brokerages have to say about the second-quarter results

Infosys' stock jumped more than 3% in early trading on Thursday after the country's second-largest IT services firm reported a 12 percent increase in net profit for the September quarter, to $5,421 crore, from a year earlier. In addition, Infosys boosted its revenue forecast as it expects additional contracts from global companies looking to expand their digital capabilities.

The IT giant increased its sales growth prediction for this fiscal year to 16.5-17.5 percent in constant currency (cc) from 14-16 percent previously. Its margin target for fiscal 2022 was kept at 22 percent to 24 percent.

According to analysts, the increase in revenue growth projections was a pleasant surprise. In a note, Motilal Oswal wrote, "We continue to anticipate scope for a beat and a raise over the next two quarters as INFO gains from an improved major deal focus and demand tailwind."

Given its skills in cloud and digital transformation, the brokerage has reiterated its 'Buy' rating with a target price of 1,960 per share, as it continues to see Infosys as a significant beneficiary of an acceleration in IT spends. Motilal added that its preference for Infosys over TCS is based on the latter's stronger growth potential, which was bolstered by this result.

TCS' stock has dropped 5% in the last five trading days after the country's largest IT firm missed revenue and margin targets last week.

ICICI Securities' #1 Buy is still Infosys. "Normal seasonality is forecast for the December quarter, with Infosys and Mindtree hinting at possible furloughs." TCV of deal wins saw a negative trend (QoQ) for all three, as it did for TCS," according to an ICICI Securities note.

The Bengaluru-based firm reported $2.15 billion in large deal signings for the quarter ending September 30, with 22 large transactions completed. The transaction pipeline is still strong, with a fair mix of new and renewal deals that provide strong revenue visibility.

"Broad-based revenue growth, revised revenue growth guidance for FY22, solid deal intake, and margin resilience." "However, we were not pleased with the increase in attrition," they wrote in a note.

Given the excellent earnings momentum and robust demand environment, Emkay has maintained its 'Buy' view on Infosys with a target price of $1,910.

Client acceptance of digital transformation and significant revenue contribution drove Infosys' broad-based growth across verticals and locations. Large contract wins and clients' acceleration of digital initiatives boosted its dollar revenue to $3.9 billion.

"Overall, Infosys delivered better-than-expected results, particularly in terms of revenue growth. "We retain our constructive outlook on Infosys with a price objective of 2,016 following the Q2FY22 results," said Jyoti Roy, DVP-Equity Strategist, Angel One.