HCLTech Q3 Results Review - HDFC Securities Upgrades Target Price; Maintains 'Add' On The Stock; Here's Why

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HDFC Securities Institutional Equities

HCLTech Ltd. delivered an in-line revenue/margin performance. Revenue growth of 3.8% QoQ constant currency was supported by growth in services, CTG acquisition and software business seasonality. On expected lines, the company raised the lower-end of the guidance – revenue guidance at 4.5 to 5% CC for FY25E (versus 3.5 to 5% earlier).

The guidance implied a soft exit in Q4 impacted by completion of large program (retail and CPG vertical), planned reduction in Verizon deal, and lag impact of discretionary ramp-up. While the new deal total contract value remains soft at 2.1 billion (-5% QoQ and +9% YoY) and at a lower than targeted level of $2.3- 2.5 billion, the shorter deal duration may support near-term growth (annual contract value up more than 20% YoY). We maintain Add on HCLTech with a target price of Rs 2,010, based on 24 times FY27E.

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