Accumulate HCL Tech; target of Rs 1025: Emkay

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26 Aug, 2025 12:21

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HCL Tech reported revenues at US$ 1,491 mn flat QoQ missing our expectations of 0.7% QoQ; however constant currency sequential growth at 2.7% compares favorably to 1.6%/0.1% for TCS and Mindtree respectively

EBIT margins slipped by ~250 bps sequentially to 21.3% more than our expectation (170 bps) due to investments in business (150 bps) and cross currency headwinds (60 bps). Remains confident of sustaining EBIT margins in the 21-22% in the medium term

Underlying metrics stay solid; healthy migration in client metrics (no of US$ 20mn+/US$ 50 mn+ clients up by 4 /1 QoQ) along with wining new deals and strong headcount addition for third consecutive quarter

Moderate FY16/17E EPS by 3.5%/0.4% each, retain ACCUMULATE TP unchanged at Rs 1,025. We remain confident of HCL Tech’s growth prospects given underlyingstrength in operating performance. HCL Tech followed by Infosys and TCS remain our preferred picks in the Tier I space in that order

"While we cut our FY15/16/17E earnings by 3.5%/3.5%/0.4% each driven by Mar’15 quarter miss and slight moderation in revenue growth/margin assumptions for FY16/17 ( refer table below), we retain ACCUMULATE on HCL Tech with an unchanged TP of Rs 1,025, based on 15x FY17E P/E. Despite the soft reported performance in Mar’15 quarter, we remain confident of HCL Tech’s growth prospects given underlying strength in operating performance. HCL Tech followed by Infosys and TCS remain our preferred picks in the Tier I space in that order", says Emkay Global Financial Services research report.

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