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HCL Technologies share price nosedived 6.9% on Monday morning to hit a low of Rs 1,244 per share, days after the company announced its quarterly results. Investors sold shares of HCL Technologies as the IT major reported a 13.6 per cent fall in net profit to Rs 3,442 crore for the October-December quarter. Revenues were 15.7% higher from the year-ago period. HCL Technologies stock was down in the red but analysts have not given up on the IT firm and remain bullish. Some brokerage firms have even upgraded their target price for HCL Technologies, making today’s fall in stock price a more attractive buying opportunity.
Kotak Securities: Buy
Fair value: Rs 1,500
HCL Technologies reported remarkably strong revenue strong growth and an equally disappointing margin. Kotak Securities have raised revenue growth forecast by 1-3%. “We believe that services business can grow 14% in FY2023E powered by leadership in fast-growing ERD, improved participation in integrated & digital deals and strong TCV & deal pipeline,” they said. “Roll-over to FY2024E financials drives 7% increase in FV to Rs 1,500; we value services business at 25X FY2024E EPS,” they added. The stock will have to rally 20% from today’s low to touch the fair value.
Motilal Oswal: Buy
Target price: Rs 1,690
Analysts at Motilal Oswal have maintained their ‘Buy’ rating on HCL Technologies. “Strong sequential growth within services, robust headcount addition, healthy deal wins, and a solid pipeline indicates an improved outlook,” the brokerage firm said while adding that growth acceleration may compensate for margin hit. “Given its deep capabilities in the IMS space and strategic partnerships, investments in Cloud, and Digital capabilities, we expect HCLT to emerge stronger on the back of an expected increase in enterprise demand for these services,” they said. The target price implies a massive 35% upside.
Yes Securities: Buy
Target price: Rs 1,556
Yes Securities highlighted the strong deal booking for HCL Technologies. The IT major saw 64% on-year growth in deal booking at $2.14 billion. Analysts believe the stock is trading at an attractive valuation at a PE of 19.3x on FY24E EPS. “We value the stock at 22.5x on FY24 earnings, arriving at a target price of Rs 1,556/share,” Yes Securities added.
ICICI Direct: Hold
Target price: Rs 1,430
ICICI Direct believes margin pressure on Services may continue and has hence downgraded the stock from a ‘Buy’ rating to ‘Hold’. “The management reiterated double-digit revenue guidance for FY22 and 19- 21% EBIT margin for FY22. The company indicated that 65 bps margin impact for the quarter (due to seasonal leaves) would not be recurring in nature but other factors may continue to impact for a few quarters. Due to this, HCLT expects EBIT margins to be at the lower end of the guided range,” ICICI Direct noted. The target price suggests a 14.9% upside.
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