Buy HCL Technologies; target of Rs 850: Way2Wealth

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26 Aug, 2025 12:21

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Way2Wealth is bullish on HCL Technologies and has recommended buy rating on the stock with a target of Rs 850 in its January 18, 2013 research report.
 
“HCL Technologies again reported a good quarter of topline growth and margin expansion. Revenue grew by 3.61% to $1154.70mn supported by 3% of volume growth and 60bps of realization improvement. Infra management grew by 10.9% QoQ and was responsible for most of the revenue growth. This is the second consecutive quarter of more than 10% sequential growth in IMS. IMS contributed 79.5% and 67.1% of incremental quarterly and yearly revenues of the company. But, in software services business, soft performance continues and in Q2FY13 growth in that business line was 96bps sequentially. Lower volume growth in software services also negatively surprised us. BPO business reported 2.17% of sequential growth to $51.18 and manages to garner better profitability.”
 
“Improvement in sequential margin performance in a quarter of wage hike and unfavorable forex movement positively surprised us. EBIT margin improved by 40bps sequentially to 19.83% backed by SG&A optimization and improvement in utilization. Overall, HCLT is the only company to have reported a margin improvement in times of appreciating rupee. HCL reported 10.95% of sequential growth in BFSI space and on YoY basis growth was more than 15%. Although, the BFSI clients are under stress both in USA and Europe, but, HCL’s focused approach on the IMS which aid cost optimization helped the company to grow faster in tough times. HCL is also experiencing new opportunities in the areas of mobility, bigdata, CRM and regulatory management. Over the last few quarters, HCL won $1bn of TCVs in the BFSI and we believe, ramp up of those deals are expected to cushion growth of BFSI in the near to medium term.”
 
“We remain positive on HCL Tech mainly driven by consistent quarterly performance and better revenue visibility. At the current market price of Rs700, HCL Technologies is trading at 12x of FY14E EPS of Rs59.78. Based on the recent comparative outperformance, we also revise our target multiple upward and believe the stock price to reach Rs850 levels after discounting FY14 EPS by 14x (2 point lower than Infosys). HCL Technologies would remain our top pick in Indian IT sector,” says Way2Wealth research report.

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