The share price of HCL technologies gained over 4% as the IT major on Friday reported robust growth during the first quarter of the financial year 2024-25. The share price of HCL Technologies jumped 4.88% to an intra-day high of Rs 1,636.40 on NSE.
HCL Tech Q1FY25 Performance
HCL Technologies reported a consolidated net profit of Rs 4,257 crore for the quarter ended June 2024, marking a 20% increase from Rs 3,534 crore a year ago. This figure surpassed thel estimates of Rs 3,820 crore.
Revenue from operations rose 7% year-on-year to Rs 28,057 crore. On a sequential basis, net profit grew 7% from Rs 3,986 crore reported in the December quarter, although revenues declined 1.5% quarter-on-quarter.
In constant currency terms, revenue for the quarter increased 6% year-on-year but decreased 1.6% quarter-on-quarter. In dollar terms, revenue was up 5% year-on-year.
The IT services company reported an EBIT of Rs 4,795 crore for the April-June 2024 period, representing a 7% year-on-year increase but a 4% decline quarter-on-quarter. EBIT margins improved marginally to 17.1% in Q1FY25 from 17% in the same quarter last year.
For FY25, HCL Tech expects revenue growth to be between 3-5% year-on-year in constant currency terms, with services revenue growth also projected in the range of 3-5% (CC). The company has guided for an EBIT margin of 18-19% for the fiscal year.
Brokerages on HCL Technologies
Motilal Oswal on HCL Technologies
Motilal Oswal has upgraded HCL Technologies’ target multiple to 27x, reflecting a ~10% premium to Infosys. The domestic brokerage house has maintained its ‘Buy’ rating on HCL Technologies. The target price is set at Rs 1,850, based on a 27x FY26E EPS.
The upgrade is based on HCLT’s consistent outperformance compared to Infosys over the past three years and its significantly improved Free Cash Flow (FCF) metrics, which are now comparable to both TCS and Infosys.
Kotak Securities on HCL Technologies
Kotak Securities has maintained its ‘Add’ rating on HCL Technologies with a target price of Rs 1,650. Despite the company’s weak quarter, Kotak Securities remains cautiously optimistic about its future performance.
HCL Technologies reported a revenue decline of 1.6% in Q1, attributed to the anniversaries of several mega deals and a decline in the ER&D segment. However, a $69 million gain from the State Street JV’s divestment led to a net profit beat for the company.
Kotak Securities notes that volatility in deal wins may result in minor growth deceleration in FY25. Nonetheless, HCL’s balanced portfolio of services and positive expectations ensured a reasonable year-over-year growth rate of 5.6%.
To drive growth acceleration, Kotak Securities emphasizes that HCL needs to step up its deal wins. The company’s growth has been heavily reliant on its Verizon deal over the past 2-3 quarters.
CLSA Report on HCL Technologies
CLSA has downgraded HCL Technologies to a ‘Hold’ rating with a target price of Rs 1,556. The company reported Q1 revenue of $3,364 million, marking a 5.6% year-over-year increase but a 1.9% sequential decline in constant currency.
The sequential revenue decline was largely attributed to the offshoring of large contracts in the BFSI vertical and productivity benefits passed on to large customers during Q1. Despite these challenges, HCL’s EBIT margins stood at 17.1%, in line with consensus expectations.
CITI on HCL Technologies
CITI has maintained its ‘Neutral’ rating on HCL Technologies with a target price of Rs 1,545. The company reported a largely in-line Q1, with a constant currency decline of 1.6% QoQ and EBIT margins down 50 basis points QoQ.
The ER&D segment saw a decline of 3.5% QoQ, and the total contract value (TCV) of $1.96 billion was weaker than expected. Forward-looking indicators include a 1.5% year-over-year increase in headcount, adjusted for divestiture.
Nomura on HCL Technologies
Nomura has maintained its ‘Buy’ rating on HCL Technologies, raising the target price to Rs 1,720 from Rs 1,700. The company posted a slight beat to estimates for Q1FY25.
The report notes that the impact of Generative AI (GenAI) will vary across different service lines. Despite this variability, HCL Technologies remains on track to achieve its FY25 revenue growth guidance.
Stock Performance in Last One Year
In terms of stock performance, HCL Tech shares have demonstrated positive returns across multiple time frames. Over the past month, the stock has given a commendable 12.23% return, showcasing its stability and growth potential. The last six months have seen even more impressive results, with a substantial increase of 1.50%, indicating a strong upward trend.
Year-to-date, HCL Tech shares have surged by 8.61%, reinforcing the stock’s positive momentum in the current fiscal year. Looking at the broader picture, the stock has delivered an impressive return of over 39.71% in the last twelve months, emphasizing its sustained growth and attractiveness to investors.
(Disclaimer: Views, recommendations, and opinions expressed are personal and do not reflect the official position or policy of Financial Express.com. Readers are advised to consult qualified financial advisors before making any investment decisions. Reproducing this content without permission is prohibited.)