Shares of HCL Tech rallied 4 per cent in early morning trade on Monday after the company came up with better-than-expected Q1FY25 earnings. For the April-June quarter, the IT services company registered a 6.8 per cent sequential increase in its net profit to Rs 4,257 crore for the June quarter.
The company’s revenue in US Dollar terms also fell 1.9 per cent from the March quarter to $3,364 million.
The company’s earnings during the first quarter of the current financial year received strong support from the telecom vertical. However, there are some concerns about the growth outlook for FY25 and persisting concerns about rising attrition.
What Should Investors Do? Buy, Sell Or Hold?
Brokerage firm CLSA has downgraded the stock to “hold” from its earlier rating of “outperform” and a price target of Rs 1,556. It said that the management commentary on both demand outlook and guidance for the full year has remained unchanged.
Jefferies is expecting HCLTech to deliver a Compounded Annual Growth Rate of 6 per cent for revenue in constant currency terms and 9% in its Earnings Per Share (EPS) over financial year 2024 – 2027. The brokerage retained its “hold” rating on the stock with a price target of ₹1,630.
JPMorgan believes that while momentum stays ahead of larger peers for HCLTech, cautious comments from the management, signings and guidance is suggesting that it is not out of the woods yet. It added while incremental guidance remains achievable, demand momentum is choppy based on the recent deal wins trajectory. JPMorgan is “neutral” on HCLTech with a price target of Rs 1,510.
Reaching the higher end of revenue and margin guidance may be a stretch for HCLTech, UBS said in its note. A net headcount decline and intent for fewer fresher hires suggests that demand stabilisation may still be far away, the brokerage said.
UBS also said that the absence of a major deal win and a soft first half will make it difficult for revenue growth to reach the upper end of the guidance. “With impending wage hikes, margin guidance may be at risk as well,” the brokerage said. UBS is “neutral” on HCLTech with a price target of Rs 1,500.
However, Nomura believes HCLTech is on track to achieve its financial year 2025 revenue growth guidance. It has raised its financial year 2025 – 2026 Earnings Per Share estimate between 3 per cent and 4 per cent, while retaining its “buy” rating on the stock with a price target of Rs 1,720.
Expecting significant upside in HCL Tech shares after Q1 results 2024, Sumeet Bagadia, Executive Director at Choice Broking, said, “HCL Tech share has been on an upward trajectory, currently trading at a market price (CMP) of Rs 1560.20. This suggests a strong bullish sentiment surrounding the stock. What’s particularly encouraging is that HCL Tech is trading above its 20-day, 50-day, and 200-day moving averages. This alignment of the stock’s price with multiple moving averages is a positive sign for investors, indicating a consistent and sustained uptrend.”
“Additionally, there’s a small resistance level at 1575, which, if broken, could trigger further upward movement. This implies that the stock has the potential to push higher. The Relative Strength Index (RSI), at 75.29 and on an upward trajectory, suggests increasing buying activity. However, investors should exercise care and watch the stock if it falls below 1488, as this might negate the favourable outlook,” Bagadia added.
On suggestion to stock market investors regarding HCL Tech shares after Q1FY25 results, Bagadia said, “We recommend buying HCL Tech shares at CMP of Rs 1560.20 levels. It can also be added on dips near Rs 1530 with a stop loss of Rs 1488 for the target of Rs 1680.”
Shares of HCLTech had ended 3.3 per cent higher on Friday at ₹1,561. The stock is up 5.3 per cent so far in 2024.
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