For Q1, HCLTech reported 0.8% QoQ revenue decline in constant currency, 1.3% growth in USD terms and a 0.3% growth in INR terms, with all geographies except Americas reporting growth. All sectors grew QoQ, albeit healthcare and telecom were weak. HCLTech recorded a new large deal value (TCV – total contract value) of $1.8 billion in 1Q. Management has upgraded the lower end of its revenue growth guidance from 2%- 5% to 3%-5% in CC terms for FY26.
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Systematix Report
HCLTech Ltd. trades at 26.3 times 1-year forward multiple, a 50+% premium to its last 10-year average historical valuation. HCLTech's weak margin performance in Q1 FY26, along with the trimmed guidance, has led to a decline in EPS for FY26.
Despite this, we continue to view HCLTech's revenue growth positively, as it remains the fastest-growing among the top five players. However, the earnings outlook has deteriorated due to the pressure on margins.
Applying an unchanged target multiple of 23 times FY27E earnings per share we arrive at a target price of Rs 1,592 per share, and reiterate Hold, as the stock does not offer much upside from CMP.
Key risks to our assumptions: Higher-thanexpected margin expansion and earnings growth.
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