Following HCLTech's September-quarter results, Motilal Oswal raised its FY28E EPS estimate by 1.9% and maintained HCLTech as its preferred pick in the large-cap IT space. HCLTech reported Q2 FY27 revenue of $3.7 billion, rising 2.3% QoQ constant currency, below brokerage's estimate of 3% QoQ CC. Ebit margin came in at 18.2%, in line with estimate of 18.1%. New deal TCV was $3.3 billion (up 26.8% YoY) in Q2 FY27.
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Motilal Oswal Report
Domestic brokerage firm Motilal Oswal has reiterated its Buy rating on the HCLTech Ltd. with an unchanged target price of Rs 1,450 based on 18 times FY28E EPS.
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Following HCLTech's September-quarter results, Motilal Oswal raised its FY28E EPS estimate by 1.9% and maintained HCLTech as its preferred pick in the large-cap IT space.
HCLTech Q2 Results Highlights
- HCLTech reported Q2 FY27 revenue of $3.7 billion, rising 2.3% QoQ constant currency, below brokerage's estimate of 3% QoQ CC.
- Ebit margin came in at 18.2%, in line with estimate of 18.1%. New deal TCV was $3.3 billion (up 26.8% YoY) in Q2 FY27.
- For FY27, revenue growth guidance was raised at the lower end to 2.5–4.0% YoY in CC (from 1.0-4.0%), driven by M&A; organic guidance remained unchanged. IT Services revenue growth guidance was revised to 3–4% YoY CC from 1.5–4.5%, reflecting a cut of 50bp at the upper end.
- Ebit margin guidance of 17.5–18.5% is in line with Motilal Oswal's estimates.
- For H1 FY27, revenue/Ebit/adjusted PAT grew 12.7%/17.2%/20.8% YoY in INR terms.
- The brokerage expects revenue/EBIT/PAT to grow 9.1%/9.4%/11.2% YoY in H2 FY27. Free cash flow stood at 87% of net profit for Q2 FY27.
Valuation and View
The brokerage expects HCLTech to deliver a USD revenue compound annual growth rate of ~4% and INR PAT CAGR of ~12% over FY26–28, with EBIT margin reaching ~18%.
While FY27E growth remains constrained by client-specific challenges in the telecom and manufacturing vertical, strong bookings, accelerating Advanced AI revenue, and the ramp-up of large deals provide support for a stronger growth trajectory in FY28E.
AI-led productivity gains and a higher-margin revenue mix should also support profitability.
The brokerage continues to like HCLTech's all-weather portfolio. Its investments in Sarvam and the AI data center business strengthen its long-term AI positioning.
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