HCLTech's better-than-expected Q2FY25 earnings and an upgrade in FY25 revenue guidance prompted several brokerages such as Nuvama, Centrum Broking, Antique Stock Broking, and Investec to raise their target price on the stock.
On October 14, HCLTech shares closed 1.4 percent higher at Rs 1,865. On a year-to-date basis, HCLTech has gained nearly 26 percent, outperforming the Nifty 50 which gained 16 percent during the same period.
Nuvama, impressed by the earnings beat raised its target price to Rs 2,125 from Rs 2,020. "HCLTech has been, by far, the best-performing stock in the large-cap IT space. Its sharp re-rating has been driven by higher growth than peers and rectification of its capital allocation policy—fundamentals that shall sustain in FY25 too," the brokerage said.
HCLTech delivered a strong broad-based growth across verticals. HCLTech's Engineering and R&D Services, HCLSoftware, and IT and Business Services grew 1.1 percent, 1.4 percent, and 1.8 percent sequentially.
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"Given HCLTech's broad-based growth, balanced portfolio, and positive commentary on the demand environment witnessed, we believe that the company is well placed to deliver decent growth in the remaining part of the year as well," Antique Stock Broking said while raising the target price to Rs 2,000 from Rs 1,875.
Centrum Broking maintained an 'Add' rating on HCLTech while increasing its target price to Rs 1,994. The brokerage believes that there is some optimism in the near term demand environment with early signs of revival in discretionary spending in the BFSI vertical. The firm also expects a gradual improvement in revenue growth led by the ramp of recently signed deals and growing traction in AI-based solutions.
HCLTech raised its revenue growth guidance for FY25, now expecting growth in the range of 3.5-5 percent, up from the previous 3-5 percent range. The company expects its margin to range between 18-19 percent, consistent with its earlier guidance.
The H2FY25 operating margin is, however, likely to see an impact from wage hikes. The company management also remained a bit conservative due to macro and geopolitical uncertainties, as pointed out by Nuvama. HCLTech's management said that EBIT margin would be impacted by 70-80 bps in Q3FY25 and by 50-60 bps in Q4FY25.
On a slightly cautious note, Investec maintained its 'Sell' recommendation on HCLTech while also hiking its target price to Rs 1,540 from Rs 1,312.
HCLTech reported a consolidated net profit of Rs 4,235 crore for the quarter ending September, reflecting a 0.5 percent decline QoQ. This figure exceeded Moneycontrol's estimate of a 5.5 percent QoQ decline to Rs 4,024 crore. Meanwhile, revenue from operations increased by nearly 3 percent QoQ to Rs 28,862 crore, surpassing Moneycontrol's forecast of 1.6 percent QoQ growth to Rs 28,517 crore.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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