HCLTech shares rose nearly 5 percent after the company's June quarter earnings prompted several brokerages like Nomura, Kotak Institutional Equities and Citi Research to raise their target price on the stock.
Brokerages said that HCLTech's Q1FY25 performance was stable and in line with expectations, adding that continued deal wins and efficient execution were necessary to drive future growth.
At 9:20 AM, HCLTech shares were up 4.3 percent, trading at Rs 1,627, making it the top gainer in the Nifty 50 index. The stock has only gained 2.2 percent over the past six months, significantly underperforming the Nifty 50, which has risen over 11 percent in the same period.
Nomura, Kotak Institutional Equities and Citi have raised their target prices for HCLTech to Rs 1,720, Rs 1,650, and Rs 1,545 respectively, citing net profit beat as the key factor. Despite the target raise, Citi maintains a 'Neutral' rating on the stock due to a 3.5 percent quarter-on-quarter decline in the ER&D segment and weaker-than-expected total contract value (TCV) at $1.96 billion.
Also Read | HCLTech Q1 Earnings Preview: Analysts predict marginal downturn in revenue, profit
Jefferies has a 'Hold' rating on HCLTech, while JPMorgan maintained a 'Neutral' stance, noting that cautious comments, signings, and guidance indicate ongoing challenges for the company.
In contrast, CLSA downgraded its rating on HCLTech to 'Hold'.
HCLTech released its June quarter earnings on June 12 after market hours, reporting a 6.7 percent quarter-on-quarter increase in net profit to Rs 4,257 crore. The gain from the State Street JV's divestiture was a notable factor contributing to the net profit beat, as highlighted by multiple brokerages.
However, the company’s revenue fell 1.6 percent sequentially to Rs 28,057 crore. The sequential decline was attributed to the offshoring of a significant BFSI contract and productivity benefits passed on to large customers.
Also Read | HCLTech sees headcount decline by 8,080 in Q1FY25
According to an average of 10 estimates compiled by Moneycontrol, the company’s revenue was projected to fall 1 percent quarter-on-quarter to Rs 28,094 crore, and the net profit was estimated to decrease by 3.7 percent on-quarter to Rs 3,838 crore.
The EBIT margin for the June quarter stood at 17.1 percent, which was broadly in line with Moneycontrol's estimate of 17.2 percent.
There is a consensus amongst brokerages that HCLTech's FY25 growth guidance of 3-5 percent in constant currency and margin guidance of 18-19 percent both seem to be achievable.
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