Brokerages say the Q3 earnings were ahead of estimates led by higher-than-expected revenue growth in the software business. Strong revenue growth guidance of 16-16.5% YoY in CC terms for the services segment should address investor concerns on the company’s growth,
said.
Shares of the company were, however, trading 1.5% lower at Rs 1055.80 on BSE in the morning hours on Friday.
Here’s what top brokerages said on
after Q3 results:
Jefferies | Target price: Rs 1,050
The global brokerage firm has raised its FY23-25 EPS estimates by 2-3% to factor in the beat. Over FY23-25, it expects HCL Tech to deliver a 7% cc revenue CAGR and an 11% EPS CAGR supported by a slight recovery in margins. Amidst rising demand uncertainty, at 18x PE, the stock trades at a 12% premium to its 5-year average PE, which limits the upside, Jefferies said. It has maintained a hold rating with a revised target price of Rs 1050 based on 16x PE.
Kotak Institutional Equities | Target price: 1,280
A more balanced portfolio mix with momentum in apps and decent positioning in vendor consolidation and cost take-out mandates can offset vulnerability in ERD and products portfolios, and drive industry-matching growth, even in a slowdown phase for tech spending, Kotak said while upgrading EPS and retaining buy rating on the stock.
Nuvama | Target price: Rs 1,220
“While we see strong sustainable demand (transformational/cost-takeout deals) driving growth for the sector – HCLT is likely to underperform peers, primarily due to its unfavourable business mix (33% rev from P&P and ERD). Inexpensive valuations and high dividend yield limit the downside potential,” it said with a hold rating.Emkay Global | Target price: Rs 1125
Emkay has raised earnings estimates by 1.4-1.8% for FY23E-25E, factoring in Q3 performance. It has maintained a buy rating with a target price of Rs 1,125 per share at 17x Dec-24E EPS (earlier Rs 1,100).
Securities | Target price: Rs 1,210
“We expect HCLT to report a healthy revenue driven by consistent transformation deal wins, increasing focus on ER&D services and rising share of Mode 2 business. We increase our FY23E and FY24E EPS estimates by 2% and 3%, due to margin expansion and deal wins,” it said.
In view of strong deal wins, strong revenue guidance and a healthy margin outlook, it has maintained a buy rating on the sock with a revised target price of Rs 1,210, valuing the stock at an unrevised P/E multiple of 17x FY25E earnings.
Motilal Oswal | Target price: Rs 1,270
“Given its capabilities in the IMS and Digital space and strategic partnerships and investments in Cloud, we expect HCLT to emerge stronger on the back of an expected increase in enterprise demand for these services. The stock is trading at ~15x FY24E EPS, which offers a margin of safety,” Motilal said with a buy rating.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)