HCL Tech in the spotlight after results: Should you buy, sell or hold?

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Here is what brokerages have to say about the stock and the company after earnings.

UBS

We maintain a 'neutral' rating on the stock with a target of Rs 965.

The commentary and performance almost defy any major slowdown risk. The management highlighted acceleration of cost saving projects.

We expect investors to react positively given strong Q2 execution.

JPMorgan

We have kept an 'underweight' rating on the stock and raised the target price to Rs 850 from Rs 820.

The company has reported an all-round beat for Q2. Revenue outperformance came from services business and forecast for H2 appears ambitious.

Margin recovery to 18% is a key achievement helped by sharp 100 basis point realisation increase, while margin forecast of 18-19 percent implies a further margin recovery in Q3.

Macquarie

We have kept an 'outperform' call on the stock with a target of Rs 1,420.

The firm posted a good beat on all counts with no one-offs, and the management is confident about services growth.

Morgan Stanley

We have upgraded the stock to 'overweight' from 'underweight' and raised the target price to Rs 1,100 from Rs 870.

Consistency in revenue growth in services and improving EBIT growth should drive re-rating. Valuation being at a steep discount to peers makes risk-reward favourable.

We raise FY23/24/25 earnings per share (EPS) estimates by 1.6%/5/9%/5.6% and FY23-25 EBIT margin assumptions by 46-73 basis points.

Nomura

We maintain 'neutral' rating on the stock and raise the target price to Rs 980.

The Q2 beat on all counts and healthy deal wins & robust pipeline give comfort.

We raise FY23-24 EPS estimate and target by 4%.

Sharekhan

HCL Tech is expected to achieve its revenue growth forecast in FY2023 given its strength in digital foundation, unique integrated infrastructure and app services, and leadership in the fast-growing ERD segment.

Notwithstanding volatility in stock performance, we believe the stock offers favorable risk-reward ratio at current levels for long-term investment.

We continue to prefer HCL Tech, given strong capabilities in digital foundation, higher payout ratio, healthy deal wins and reasonable valuation of 17x/15x/13x its FY2023E/FY2024E/FY2024E earnings. Hence, we maintain buy rating on the stock with an unchanged price target of Rs 1,140.

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