Buy HCL Technologies; target of Rs 1050: Sharekhan

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26 Aug, 2025 12:21

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HCL Tech has reported better- than-expected revenue performance, with 3.3% sequential growth on CC basis to $1,991.7 million, ahead of our expectations of 2.6%  growth. The outperformance was led by better- than-expected performance in E&RD services (up 13.6% q-o-q), which took overall IT services growth to 6.1% q-o-q. Revenue performance was commendable, given the softness in India business and discontinuation of JV with DXC.  Mode 2 and Mode 3 (Digital and Products/ Platforms/IPs) contribute 25% to revenue, as compared to 19.5% in FY2017. EBIT margin for the quarter came at 19.6% vs. 19.7% in Q2FY2018, tad below our estimates, owing to higher-than- expected depreciation/amortisation cost. Net profit for the quarter stood at Rs. 2,194 crore, up 0.3% q-o-q. During the quarter, HCL Tech signed 20 transformational deals (vs. 15 deals in Q2FY2018) across verticals.

Outlook We maintain our Buy rating on the stock with a revised price target (PT) of  Rs. 1,050 (rollover target multiple to FY2020).

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