Jefferies has a ‘Hold’ rating on HCLTech, while JPMorgan maintains a ‘Neutral’ stance, citing that cautious comments, signings, and guidance suggest ongoing challenges for the company.
HCLTech shares rose nearly 5 percent after the company’s June quarter earnings prompted several brokerages, including Nomura, Kotak Institutional Equities, and Citi Research, to raise their target prices on the stock. Brokerages noted that HCLTech’s Q1FY25 performance was stable and met expectations, emphasizing that continued deal wins and efficient execution are crucial for future growth.
At 9:20 AM, HCLTech shares were up 4.3 percent, trading at Rs 1,627, making it the top gainer in the Nifty 50 index. Despite this, the stock has only gained 2.2 percent over the past six months, significantly underperforming the Nifty 50, which has risen over 11 percent during the same period.
Nomura, Kotak Institutional Equities, and Citi have raised their target prices for HCLTech to Rs 1,720, Rs 1,650, and Rs 1,545, respectively, citing a net profit beat as the key factor. Despite the target raise, Citi maintains a ‘Neutral’ rating on the stock due to a 3.5 percent quarter-on-quarter decline in the ER&D segment and weaker-than-expected total contract value (TCV) at $1.96 billion.
In contrast, CLSA downgraded its rating on HCLTech to ‘Hold’.
HCLTech released its June quarter earnings on June 12 after market hours, reporting a 6.7 percent quarter-on-quarter increase in net profit to Rs 4,257 crore. The gain from the State Street JV’s divestiture significantly contributed to the net profit beat, as highlighted by multiple brokerages. However, the company’s revenue fell 1.6 percent sequentially to Rs 28,057 crore, attributed to the offshoring of a significant BFSI contract and productivity benefits passed on to large customers.
According to an average of 10 estimates compiled, the company’s revenue was projected to fall 1 percent quarter-on-quarter to Rs 28,094 crore, and net profit was estimated to decrease by 3.7 percent quarter-on-quarter to Rs 3,838 crore. The EBIT margin for the June quarter stood at 17.1 percent, broadly in line with the market estimate of 17.2 percent.
There is a consensus among brokerages that HCLTech’s FY25 growth guidance of 3-5 percent in constant currency and margin guidance of 18-19 percent are achievable.
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