Reduce HCL Technologies; target of Rs 1710: ICICI Securities

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ICICI Securities research report on HCL Technologies

HCLT has reported a beat vs our and consensus estimates on both revenue and margin fronts in Q2FY25. Discretionary spends picked up in BFSI and technology services. Management commentary was upbeat on near-term demand with a qualification that macro and geopolitical uncertainties could still impact discretionary spends negatively. Upward revision of 50bps in revenue guidance at the lower end is not in line with beat in Q2, underscoring cautious outlook. Strong show in Q2 and near-term upbeat commentary lead to 3.6% increase in FY25E EPS; however, FY26-27E EPS increase is limited to 1-2%.

Outlook

We value HCLT on SoTP basis – services (IT and ER&D) at 25x (earlier 22x) and products at 20x (earlier 18x) on FY26E EPS to arrive at our TP of INR 1,710. Retain REDUCE on full valuations; stock has run up ~47% in last one year.

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HCL Technologies - 15102024 - icicis