UBS ups HCL Tech target price by 25% on strong $ rev growth

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26 Aug, 2025 12:21

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Brokerage firm UBS has retained its neutral rating on HCL Technologies, citing strong dollar revenue growth. It has raised its target price for the stock to Rs 1100 from Rs 875.

Going ahead, UBS expects HCL to report 13 percent YoY (year-on-year) growth in dollar revenue in FY16. This in turn will make it the fastest growing large-cap India-listed IT company, it adds.

"Stronger than expected revenue growth reported in 2Q FY15 has assuaged growing concerns on tapering revenue growth. The company continues to operate well above its intended margin target of 21-22 percent," UBS said in a report.

With focus shifting to engineering services as the next growth driver, the stock is expected to see good support at current valuation, UBS added.

Excerpts from the report:

1) The key positive surprise in Q2 FY15 was 11.3 percent q-o-q growth in engineering services revenue, on the back of 7.5 percent q-o-q growth in Q1 FY15. Management expects this segment, which comprised 17.7 percent of H1 FY15 revenue to be a significant growth driver in the next few years.

2) If this segment is able to replicate the company's success in infrastructure services, it could help offset the base effect in the rest of the business and prop up overall growth.

3) Sustained execution likely to keep valuation well supported. With revenue growth slowing down for many vendors, HCL Tech's strong revenue execution in Q2 FY15 has raised expectations of better revenue growth than peers in FY16 and beyond.

(Posted by Devika Ghosh)