HCL Tech shares surge 4% on Q1 profit beat. Time to hold or buy?

On a sequential basis, the company’s net profit increased 7% from Rs 3,986 crore reported in the December quarter. Revenues, meanwhile, declined 1.5% quarter-on-quarter.

Here is how brokerages viewed the update:

Motilal Oswal
HCL Technologies would most likely outperform for three straight years on growth. Further, HCL’s FCF metrics have meaningfully improved during this time and are now comparable to both and Infosys. Motilal Oswal believes that this warrants a multiple premium to Infosys.

“HCLT traded at a premium to Infosys for considerable periods in the past, and we believe its current performance warrants this re-rating,” said Motilal in a report.

Motilal Oswal reiterates its ‘buy’ rating on the stock with a target price of Rs 1,850.

Nomura

Nomura stated that HCL Tech has retained its 3-5% y-y revenue growth guidance for FY25E in cc terms, which does not factor in an improvement in discretionary demand vs FY24. HCLT notes that it is seeing certain signs that discretionary demand may have bottomed out, but it is too early to call with certainty. In their recent India IT Services Sector report, they have highlighted that discretionary demand is unlikely to worsen further based on our proprietary G2000 database.

With this, the global brokerage firm has a buy view on the stock with a target price of Rs 1,720.

Nuvama

“HCLT's sharp re-rating has been driven by higher growth than peers and rectification of its capital allocation policy—fundamentals that shall sustain in FY25 too. It is currently trading at a 5% discount to Infosys–versus historical discount of 15%–20%– justified, to a large extent, by its higher growth in FY24 as well as higher growth expectations in FY25. We remain positive on HCLT,” said Nuvama.

Nuvama has a buy rating on HCL Tech with a target price of Rs 1,800.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)