On Monday, InCred Research adjusted its stance on HCL Technologies (HCLT:IN), raising the stock's rating from Reduce to Hold and increasing the price target to INR1,576.00 from INR1,362.00. This alteration in rating follows HCL Technologies' first-quarter financial year 2025 (1QFY25) report, which showed a revenue decline of 1.6% quarter-over-quarter in constant currency terms and a year-over-year drop of 5.6% to $3,364 million. The reported figures were consistent with the consensus estimates.
Despite revenues aligning with expectations, HCL Technologies' EBIT margin of 17.1% fell slightly short of both the consensus and InCred Research's own predictions by 10 and 21 basis points, respectively. The management's outlook, which anticipates quarter-over-quarter growth across most verticals in the second quarter of FY25, with the exception of the financial services industry, provided a positive note to the company's future prospects.
However, the analyst at InCred Research pointed out certain challenges faced by the company. These include the observed weakness in the automotive segment of the manufacturing vertical, particularly due to stress in the electric vehicle sector in Germany, and a stagnant growth in discretionary spending. These factors were identified as key headwinds that could potentially impact HCL Technologies' performance moving forward.
The decision to upgrade the rating to Hold was influenced by recent industry interactions suggesting that the cycle of downgrades may be reaching its lowest point. Nevertheless, the analyst noted that the absence of significant earnings upgrades and the company's full valuation were the reasons for not elevating the rating further to Add. The report by InCred Research indicates a cautious optimism about HCL Technologies' ability to navigate through the current market challenges.
In other recent news, HCL Technologies has been the focus of several analyst adjustments following its recent financial performance. Investec maintained its sell rating on HCL Technologies, raising the price target to INR1,312. This followed a quarter-over-quarter decrease of 1.9% in the company's revenue. In contrast, Bernstein raised its target to INR1,520, maintaining a Market Perform rating, while UBS reiterated a Neutral stance with a target of INR1,500.
Morgan Stanley (NYSE:MS) kept an Overweight rating, increasing the target to INR1,705. However, CLSA downgraded the company from 'Outperform' to 'Hold,' adjusting the price target to INR 1,556.
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