The Q1 earning season proved to be difficult for central-tire IT companies, with most of the reporting topline that made investors exit. After losing about 10% a week, the continuous share is in the bear’s grip and about 24% is below the top. Cofferge shares also lost about 7% of its price in the last one week alone.
HSBC India’s Yogesh Agarwal said that the results of Q1 started intense stock correction for most mid-level IT companies. “Each company print was interesting, with some idiosynchitic tech-rich.”
Fearful Reality: The appropriate numbers that appear to be the companies that may not even escape the punishment. MPSIS finally “won a strong growth and extremely strong deal”, but also somehow “won strong growth and extremely strong deal”.
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Cash flow crisis?
The intensity of the capital is speaking in midcap IT because companies benefit from their balance sheets to win a fixed-price contract. Coffer sits at the center of this discussion, with the average 5% average in the recent quarter in its free cash flow.
“Most companies are taking advantage of their balance sheets to provide better terms for a fixed-price agreement,” Agarwal warned how daunting the competition has become.
Cash conversion crisis is not different from coffer. There has been a similar increase in the wealth of the contract that leads to poor cash conversion, while MPSis also reported a troubled trend in Q1.
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What do analysts say
Despite the massacre, some analysts are doubling the straight names. Jefferies upgraded to buy MPSis, arguing that “the key to the logistics vertical is behind overhang” and “a reform growth point of view” has raised their price target at Rs 3,100.
For coffer, Jefferies maintained its purchase rating with a Raised Price target of Rs 2,030, the company expects to deliver 23% EPS CAGR on FY 26-28 despite current conflicts.
But Ventura Securities Research Head, Vinit Bolinjkar struck more cautious tone: “Q1 Fiscal Year’s earnings season proved challenging for midcap IT companies in India, despite the choice of initial investors for them on big-cap IT companies.”
The pain is not just domestic. US And as the customers in Europe, the discretionary costs are crushing the income conversion that delays the projects between trade and inflation uncertainties. “Deal pipelines remained strong, their income was slow, especially affecting areas such as manufacturing, auto and consumer packaged goods.”
The significant trend in this quarter was the role of cross-currency tailwinds, especially due to appreciation in currencies such as the Euro and British pounds, which recorded US revenue growth.
“Nevertheless, this partly masked weakness in the volume-leadership business. Next, the overting margin was under pressure in most companies, which, despite the wages tourism, visa-related visa-related costs, and relatively soft topine growth. Corresponds to Shikhwad’s grain.
Evaluation check
Elevated valuation of the field is becoming impossible to justify without the upgrade cycle. Bolinjkar observed, “The Nifty IT index, which includes many MIDKP companies, increased significantly, trading at a premium for a long -term average.” “Without a clear earning upgrade cycle, it seems difficult to justify this elevated valuation.”
Even after recent updates, some midcap IT stocks can still be strolled with the current growth point of view, which is a quiet assessment for investors, who thought they had found safety in the considered growth engines in the field.
“In the next few months, the view for midcap IT appears mixed, some pockets of elasticity, even with the possibility of constant pressure. Lack of clear guidance from some big players, midcap leads this precaution for players,” Bolinjkar said.
However, most companies remain protected in their short -term view but are optimistic about recovery procurement in H2FY26, as the client budget stabilizes and the postponed projects begin to grow.
The area appears to be in the phase of consolidation, with the interruption of the performance to continue, the rago sums it.
(Connection: The recommendations, suggestions, opinions and opinions provided by experts have their own. This does not represent opinions of economic time)
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