HCL Tech shares fall 6% after Q4 results. Should you buy, sell or hold?

The company's board of directors recommended an interim dividend of Rs 18 per equity share for the financial year 2024-25. Its record date has been fixed on May 7, 2024.

Here’s what brokerages have to say:

Motilal Oswal

Higher exposure to the cloud, which comprises a larger share of non-discretionary spending, offers better resilience to its portfolio in the current context, with higher demand for cloud, network, security, and digital workplace services. Given its capabilities in the IMS and digital space, along with strategic partnerships and investments in cloud, we expect HCLT to emerge stronger on the back of healthy demand for these services in the medium term.

Motilal Oswal reiterated its ‘buy’ rating on the stock, with a target price of Rs 1,700, a 20% potential for upside.

Emkay Global

reported weaker-than-expected performance in Q4 while the back-ended FY25 guidance trajectory also disappointed. Revenue grew 0.4% QoQ in Q4, a little below our estimates. Services grew 3% CC QoQ, while Software declined 18.5%. EBITM dropped 220 bps QoQ to 17.6%. Net-new deal intake was healthy. FY25 revenue growth guidance also came in weaker than expected, factoring muted growth in H1, and no material improvement in discretionary spending.

Considering the above, Emkay Global downgraded the stock to an ‘add’ rating with a target price of Rs 1,600.

Nuvama

HCL Tech reported solid Q4FY24 numbers. Revenue came up by 0.3% CC QoQ, while IT services growth at 4% CC QoQ was better than our/Street’s estimate of 2.5% CC QoQ. Consolidated EBIT margin of 17.6% is in line with estimates. TCV was 19% up QoQ and 10% YoY, which was decent.

Management gave FY25 revenue guidance of 3–5% YoY CC (below expectations), impacted by higher offshoring in a project and another divestment. This leads to a -3.5%/-4.4% cut to our FY25/26 EPS.

Nuvama retained a ‘buy’ rating for HCLT with a target price of Rs 1,700, reduced from an earlier Rs 1,770.

Nomura

Nomura has maintained their Neutral rating on the company's stock. The brokerage has, however, reduced the price target to Rs 1,400 from Rs 1,500. "Q4FY24 - mixed bag of performance, FY25F guidance weaker than expected," said Nomura. The brokerage has also reduced the FY25-26F EPS estimates by 5 per cent due to lower revenue and margin assumptions.

Investec

Investec has maintained their Sell rating on the with a target price of Rs 1,300. "Had some of the best large deals in FY24 not easily replicable in our view going ahead," said Investec. Investec has further pointed out that the revenue guidance was weaker than expected and cut their FY25/26 EPS estimates by 2.2%/2.4%.

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