In a knee-jerk reaction to its quarter earnings for the December 2024 quarter, Shares of HCL Technologies Ltd cracked more than 9 per cent during the trading session on Tuesday on the back of muted commentary and guidance from the management of the software major. However, the results were in linewith the street's expectations.
Shares of HCL Technologies cracked more than 9.38 per cent on Tuesday, falling to Rs 1,799 mark on BSE, commanding a total market capitalization of 4.9 lakh crore. The IT major had settled at Rs 1,985.25 in the previous trading session on Monday, falling more than a per cent.
HCL Technologies reported a 5.5 per cent year-on-year rise (YoY) in its net profit at Rs 4,591 crore for the quarter ended December 31, 2024. The IT solutions player had reported a net profit of Rs 4,350 crore in the year-ago period, it said in the exchange filing.
HCL Tech's revenue from operations for the December 2024 quarter came in at Rs 29,890 crore, rising 5.07 per cent on a YoY basis. Its Ebit Ebit rose 8.6 per cent YoY to Rs 5,821 crore during the reported quarter, while Ebit margins expanded 90 basis points (bps) during the given period.
On the other hand, HCL Tech has updated its full year revenue guidance. The management had increased its revenue growth guidance in constant currency (CC) terms in the lower end by 100 bps for the entire FY25. Revenue growth guidance is now at 4.5-5 per cent. The company has retained EBIT margin guidance at 18-19 percent for the fiscal year.
HCL Technologies' said that its deal bookings were healthy during the quarter at $2.1 billion with wins across services and software. The IT major declared an interim dividend of Rs 18 per equity share of Rs 2 face value, which includes a special dividend of Rs 6 per share to celebrate 25 years of HCL Tech’s public listing.
HCL Technologies reported solid services business growth, led by the retail vertical and a miss on products. Organic guidance was narrowed with the same midpoint. The company will benefit from improving demand, with early indications from a broad-based deal pipeline. Yet the near term will be muted due to the mega deal anniversary, said Kotak Institutional Equities.
"We expect HCL Tech to benefit from the fair share of opportunities during the industry growth recovery uptick in discretionary spends. We expect the growth acceleration to be lower than select peers due to its portfolio mix and tepid large deal wins in the past several quarters. Stock trades at full valuations," it added with a 'reduce' rating with a fair value of Rs 1,760 on the stock.
Demand outlook for CY25 improvises on the back of improved discretionary spending in IT around GenAI, cloud and data services across major verticals except for telecom and public services, said Nirmal Bang Institutional Equities said with a 'buy' rating and a higher target price of Rs 2,282.
"We continue to like the company on a favorable mix of ER&D and software business; stable leadership; strong deal pipeline to capitalize on Gen AI and ERP automation deal wins; strong cash generation with lower DSO; and margin expansion levers. We have largely maintained our estimates with 0.8 per cent and 0.2 cut on FY26 & FY27 EPS estimates to factor in the Q4FY25 muted growth," it added.
Nuvama Institutional Equities has maintained its positive views on HCLT on the back of its superior growth, high FCF generation and capital allocation. However, at 28.5 times FY26E PE, its valuation appears full, it said. It downgraded the stock to 'hold' rating on the stock with a target price of Rs 2,150.
Among the global brokerages, Nomura has a buy rating on the stock with a target price of Rs 2,000, despite a mixed bag of the earnings. Morgan Stanley has maintained its 'equal-weight' rating on the stock with a target price of Rs 1,970.