Buy HCL Technologies; target of Rs 1050 : Motilal Oswal

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26 Aug, 2025 12:21

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Motilal Oswal 's research report on HCL Technologies

HCL Technologies (HCLT) delivered strong revenue growth (4.5% QoQ CC) on the back of broad-based recovery across geographies, verticals, and services. EBIT margin expansion (+110bp QoQ), driven by operating leverage, was better than expected. HCLT also revised its FY21 margin guidance upward (by 50bp to 20-21%) despite a potential wage hike in 3Q/4Q. This indicates its ability to sustain some amount of margin improvement, which is a positive. Strong new deal wins (+35% QoQ), good renewals, and a robust deal pipeline (+20% QoQ, all-time high) give us comfort. This, coupled with broad-based sequential growth across segments in 2Q, indicated an improved outlook.

Outlook

The stock is currently trading at a modest ~15x on FY22E earnings and offers a safety margin. Our TP is based on ~19.5x FY22E EPS (a 30% discount to TCS). Maintain Buy.

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