HCLTech’s target price Uplifted by brokerages citing robust growth prospects

In a series of optimistic evaluations, multiple brokerage firms have revised their target prices for HCLTech stock after the company maintained its fiscal year revenue guidance at 3–5% year-on-year (y-o-y) and the operating margin at 18–19%, despite a challenging first quarter.

As a result, the stock rose nearly 5% intraday to a three-month high of Rs 1,636.40 on the National Stock Exchange. Eventually, the stock erased most of its gains to end 0.5% higher at Rs 1,568.

Nuvama Institutional Equities maintained their ‘buy’ rating, elevating the target price from Rs 1,700 to Rs 1,800. “HCLTech’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,” they stated.

The Noida-headquartered IT company’s consolidated revenue fell nearly 2% sequentially to Rs 28,057 crore in April-June, while net profit rose 7% to Rs 4,257 crore on the back of a one-time gain.

Motilal Oswal Financial Services also upgraded its target price on the HCLTech stock to Rs 1,850 due to consistent outperformance in growth compared to Infosys. “Well set up for FY26: HCLTech has tackled seasonality in its first quarter well. The second half is generally a strong period for HCLT,” the brokerage said.

Prabhudas Lilladher stated in a report that the company’s resilient business mix will act as a buffer against macroeconomic uncertainties. They expect HCLTech to report modest growth, keeping their ‘buy’ rating with a target price of Rs 1,800, driven by anticipated recoveries in high-margin businesses in subsequent quarters.

Emkay Global adjusted their target price to Rs 1,700, stating: “The management is confident of growth in coming quarters, as clients continue to spend on genAI and other emerging technologies.”

HCLTech has been signing several small unit deals amounting to millions of dollars. “Most of these initiatives involve small projects at the moment, but a couple of them are substantial, double-digit million-dollar deals,” said C Vijayakumar, chief executive officer of HCLTech.

Among these, transformation deals continue to deliver substantial value, seamlessly integrating GenAI technologies. “In some instances, genAI is part of larger transformational deals, while in others, it stands alone as small projects,” Vijayakumar added.

Meanwhile, ICICI Securities maintained their guarded stance, pointing out several headwinds that could impede growth, including the ASAP Group acquisition’s integration and a slower ER&D segment. Their analysis led to a ‘reduce’ rating with a target price of Rs 1,455, signaling skepticism about the near-term growth trajectory.

HCLTech’s revenue from its European operations fell sequentially in the June quarter, mainly due to the underperformance of its recent acquisition of ASAP Group in the region. “The acquired company, ASAP, particularly in the automotive sector, performed below our expectations. There’s noticeable softness in the automotive segment, especially in Germany, which is exerting pressure,” Vijayakumar said.

The company’s revenue contribution from Europe fell 100 basis points in the June quarter, whereas sales from the Americas region rose 80 basis points sequentially, and those from the rest of the world rose 20 basis points. The company had completed the acquisition of ASAP Group, a German automotive engineering services provider, in August 2023.

Whereas, Choice Equity Broking said the stock has seen a significant rally of nearly 8% in the last one month and thus downgraded their rating to ‘REDUCE’ with a revised target price of Rs 1,615.