While the brokerage have tempered growth expectations due to a slower exit in Q3 and 4Q, HCLTech's differentiated positioning in hi-tech and semiconductors, along with its low reliance on pass-through revenues, bodes well for the medium term.
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We met with Mr. Shiv Walia, the CFO of HCLTech Ltd., and left with a positive view on the company's growth quality despite the near-term uncertainties. Management highlighted that deal durations are shortening, with larger deals being broken into smaller chunks, though the pipeline remains strong, and deal momentum is improving.
While we have tempered growth expectations due to a slower exit in Q3 and 4Q, HCLTech's differentiated positioning in hi-tech and semiconductors, along with its low reliance on pass-through revenues, bodes well for the medium term.
The HP CTG acquisition reinforces its telecom presence, diversifying exposure beyond North America and enhancing its capabilities in network solutions. On margins, Project Ascend is driving efficiencies, helping to offset cost pressures, and while shorter deal durations may affect predictability, HCLTech remains focused on reinvesting in growth.
We now value HCLTech at 28 times FY27E EPS (versus 30x earlier) owing to a slower-than-expected discretionary pick-up across the industry. We reiterate our Buy rating with a target price of Rs 2,200.
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