ICICI Securities notes that HCLTech delivered a revenue beat, reporting 4.2% QoQ constant currency growth (vs estimate of 2.2% and consensus of 2.8%), driven by strong performance in its software products segment, seasonal strength, and healthy traction in ER&D and IT services despite furlough-related headwinds.
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ICICI Securities Report
ICICI Securities has reiterated its 'Hold' rating on HCLTech Ltd. with a target price of Rs 1,590, valuing the services business at 21x one-year forward P/E and the product business at 18x.
The brokerage notes that HCLTech delivered a revenue beat, reporting 4.2% QoQ constant currency growth (vs estimate of 2.2% and consensus of 2.8%), driven by strong performance in its software products segment, seasonal strength, and healthy traction in ER&D and IT services despite furlough-related headwinds.
Trailing twelve month’s TCV growth of 21% YoY positions the company well to potentially report highest growth among large-cap peers in FY27 too.
Management notes that traditional discretionary spending has slowed, but opportunities are emerging in newer pockets like managing AI infrastructure and AI engineering services.
Key risks Key upside risks:
Faster-than-expected recovery in macros; and tailwinds in products business led by AI.
Key downside risks:
Any adverse regulatory changes in US; and geopolitical uncertainty impacting discretionary spends.
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