Broker’s call: HCL Tech (Buy)

Target: ₹2,180

CMP: ₹1,791.70

HCL Technologies (HCL Tech) reported revenue of $3,533 million, up 3.8 per cent q-o-q/4.1 per cent y-o-y in constant currency (CC) terms, missing our estimates of $3,561 million. Revenue in rupee terms stood at ₹29,890 crore, up 3.6 per cent q-o-q/5.1 per cent y-o-y.

Revenue growth was led by Software, ER&D, and Services business, up 18.7 per cent, 5.4 per cent, and 1.5 per cent q-o-q in CC, respectively. EBIT margin expanded by about 90 bps q-o-q to 19.5 per cent, beating our estimate of 19.3 per cent. Net profit stood at ₹4,591 crore, up 8.4 per cent q-o-q/5.5 per cent y-o-y, beating our estimate of ₹4,538 crore.

New deal wins TCVs stood at $2,095 million, down 6 per cent q-o-q/up 9 per cent. Management has raised the lower end of its revenue growth guidance for FY25 to 4.5-5 per cent from 3.5-5 per cent in CC terms while keeping EBIT margin guidance unchanged at 18-19 per cent. Management is seeing improvement in the demand environment with discretionary spending witnessing some uptick.

We believe the company is well placed to deliver industry-leading growth among Tier-1 IT companies for FY25 and fiscals ahead, given their decent 9MFY2025 performance, diversified offerings, and strategic partnerships with hyperscalers. We maintain Buy with an unchanged price target of ₹2,180 (valued at 28x Dec26E EPS).