HCL Technologies, the third-largest IT player in India, experienced a significant boost in its share price, climbing 6.8% on April 23 after the company released its financial results for the March quarter that aligned with market expectations. By 9:42 AM, shares were priced at ₹1,580.60 on the National Stock Exchange (NSE). Over the past five trading sessions, the stock has appreciated by over 10.89%, signaling investor confidence.
Strong Q4 Results for HCL Technologies
In its recent announcement on April 22, HCL Technologies disclosed an 8% year-on-year rise in consolidated net profit, amounting to ₹4,307 crore for the March quarter of the previous financial year (Q4 FY25). Furthermore, the operational revenue for this quarter climbed by 6% YoY, reaching ₹30,246 crore.
- Revenue Overview:
- Revenue in constant currency decreased by 0.8% quarter-on-quarter (QoQ) but saw a 2.9% increase year-on-year (YoY).
- Dollar revenue for the quarter fell by 1% QoQ while increasing by 2% YoY, totaling $3,498 million.
- Services revenue, measured in constant currency, grew by 0.7% QoQ and 2.7% YoY.
- Digital revenue, which represents 40.7% of total services, experienced a remarkable growth of 12.6% YoY in constant currency.
Profit Margins and EBIT Insights
HCL Technologies reported an EBIT of ₹5,442 crore for the quarter, which is an improvement from ₹5,018 crore in the same period last year but down from ₹5,821 crore in the previous quarter. This translates to a 6.5% decline QoQ but shows an 8.4% increase YoY. The EBIT margin improved to 18%, up from 17.6% YoY, although it decreased from 19.5% in the last quarter.
Analyst Insights on HCL Tech’s Performance
Analysts are optimistic about HCL Technologies’ financial health. Seema Srivastava, a Senior Research Analyst at SMC Global Securities, noted, “HCL Tech’s financial performance showcases a fundamentally strong business, with INR revenue of ₹30,246 crores, indicating a 6.1% year-on-year growth. The company’s robust financial indicators and consistent shareholder returns present a promising long-term outlook.”
- Brokerage Rating Changes:
- Choice Broking has updated its rating for HCL Tech, revising it to ‘add’ and adjusting the target price to ₹1,580 per share.
Economic Context and Future Projections
Despite the positive results, the backdrop of global economic uncertainty, particularly fears of a recession in the US, might impede growth. The brokerage firm cautioned that while revenue and margin forecasts for FY26 remain consistent with FY25, risks related to converting Total Contract Value (TCV) into actual revenue persist. This uncertainty has led to a reduction in growth estimates by 4-9%, prompting a more conservative margin outlook.
As a result, the revised target price of ₹1,580 reflects a PE multiple of 22x, aligning with peer valuations, compared to a previous multiple of 23x based on projected FY27 EPS of ₹71.7.
With HCL Technologies showing strong quarterly performance amidst economic challenges, stakeholders are keenly watching the company’s future moves as it navigates the complex IT landscape.
