HCLTech Ltd.'s third-quarter financial results have invited mixed reactions from analysts. Brokerages flagged concerns over weak guidance for the coming quarter, shorter deal durations, and margin pressures.
However, growth potential from HPE’s CTE acquisition, a record deal pipeline and anticipated medium-term recovery were seen as tailwinds.
Net profit rose 8.4% sequentially to Rs 4,591 crore in the December 2024 quarter, and revenue grew 3.6% to Rs 29,890 crore, meeting Bloomberg estimates.
Citi said the results were in line with expectations, supported by strong cash flow conversion and growth in tech and financial services. However, a 2% year-on-year headcount decline, weak fourth quarter guidance, shorter deal durations, and a 10% fall in total contract value to $2.1 billion raised concerns.
While maintaining a 'Neutral' rating, the brokerage said it remains cautious on near-term margins but expects a medium-term recovery with improved IT investments and discretionary spending.
Nomura reiterated its 'Buy' rating and observed that while topline was below consensus, the bottom-end of fiscal 2025 revenue growth guidance was raised, driven by HPE’s CTE acquisition. With a record deal pipeline and growth potential from generative AI in legacy tech modernisation, no changes were made to earnings projection.
Bernstein kept a 'Market Perform' rating due to resilient performance but balanced valuations. While next financial year's growth is expected to surpass the current one's, a soft March quarter and balanced valuations keep risk-reward neutral.
Morgan Stanley maintained an 'Equal-weight' rating, acknowledging third quarter services performance was in line with its expectations, tempered by lower revenue guidance but supported by optimistic management commentary.
HCLTech Share Price Target Post Q3 Results
Motilal Oswal: Target price of Rs 2,400, a potential 21% upside to last closing.
Bernstein, Nomura: Target price of Rs 2,000, a potential 1.2% upside to last closing.
Morgan Stanley: Target price of Rs 1,970, a potential 0.2% downside.
Citi: Target price raised from Rs 1,915 to Rs 1,920, a potential 2.7% downside.
HCLTech shares dropped over 9% in early trade on Tuesday, as the company's revenue guidance and margins pressures sparked concerns.
The scrip fell as much as 9.63% to Rs 1,797.75 apiece. It pared losses to trade 9.02% lower at Rs 1,810 apiece, as of 10:07 a.m. This compares to a 0.29% decline in the NSE Nifty 50 Index.
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