ICICI Securities's research report onHCL Technologies
HCLT reported healthy revenue growth in IT Services and ER&D at 3% QoQ CC (2.3% organic). Management noted improving demand momentum in last few weeks of Sep-26 quarter and citied expectations that Services revenue growth would fare above the mid-point of its guidance. However, management also acknowledged that the IT Services industry is in the early phase of an AI-led deflation, and demand environment continues to be volatile. Moreover, product business continues to drag revenues down. EBIT margin performance was impressive, aided by operating leverage, employee restructuring benefits, and higher-margin AI revenues. Nevertheless, we expect margins to remain rangebound as the company prioritises investments for growth.
Maintain REDUCE with a revised TP of INR 1,090, based on 15x FY28E P/E for the services business and 10x for the products business.
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