HCL Tech shares fall 2% on weak Q1 numbers. How to trade stock now?

HCL Technologies reported a nearly 8% year-on-year (YoY) rise in consolidated net profit for the June quarter to Rs 3,534 crore. This was lower than the ET Now poll estimate of Rs 3,792 crore. Consolidated revenue grew 12% YoY to Rs 26,296 crore, and was also a tad below the estimated Rs 26,810 crore.

The board recommended an interim dividend of Rs 10/share. The company has fixed the record date as July 20 for the dividend payment.

Here is what brokerages recommend.

Jefferies: Hold | Target: Rs 1,205
Jefferies maintains a ‘Hold’ stance on HCL Technologies shares for a price target of Rs 1,205. Deal wins were soft though management expects stronger deal wins in Q2, it said in a note. Decline in bookings reflects delays in decision-making.

Morgan Stanley: Overweight | Target: Rs 1,200
Morgan Stanley is ‘Overweight’ on HCL Tech, with a price target of Rs 1,200. Q1 performance was weaker than our expectations on all fronts. Management maintains revenue guidance but the ask rate is high. Strong commentary around potential deal closures in 2Q points to hopes of a good recovery in 2H. The brokerage expects the stock to react negatively near term.

Nomura: Neutral | Target: Rs 1,090
Nomura maintains a ‘Neutral’ stance on HCL for a price target of Rs 1,090. Meeting the top end of unchanged FY24 guidance to be extremely challenging, it said while commenting that the Q1 performance estimates missed consensus estimates. The drop in discretionary demand is starting to hurt the company.Motilal Oswal: Buy | Target: Rs 1,280
Motilal Oswal sees a 15% upside in the stock and recommends a ‘Buy’ with a price target of Rs 1,280 based on 19X FY25E EPS. HCL Technologies reported a weak 1QFY24 with revenue of $3.2b, down 1.3% QoQ in constant currency (CC) and 110 bps below our estimate. We have lowered our FY24/25 EPS estimates by 1-2% to account for the 1Q miss.

Nuvama: Buy | Target: Rs 1,300
HCL Tech reported Q1FY24 revenue of $3,200 million (-1.3% CC QoQ/+6.3% YoY) – sharply below our/Street’s estimates of 0.3%/0.8% CC QoQ growth.

Valuation is attractive and Nuvama retains ‘Buy’ for a price target of Rs 1,300. HCLT’s weak Q1 performance makes meeting its FY24 guidance a tall ask. Yet, even if it misses its guidance (as we bake into our estimates) it will still be one of the fastest-growing largecap (in IT Services).

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)