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HCL Technologies Shares Decline On Guidance Concerns

HCL Tech has reiterated that it will stick to the lower end of the guidance.

<div class="paragraphs"><p>(Photo: HCL Technologies/FB)</p></div>
(Photo: HCL Technologies/FB)

Shares of HCL Technologies Ltd. eased after the company revised its growth guidance for the current fiscal.

After the second quarter earnings, the company raised its revenue growth guidance for the financial year 2022–23 from 12–14% to 13.5–14.5% but expected the final turnover at the lower end of the guidance. HCL Technologies, at its ongoing U.S. investor day, reiterated that the company will stick to the lower end of the forecast.

Shares of the company were down 6.61% as of 11:31 a.m. compared to a 0.30% decline in the benchmark Nifty 50. The stock was trading at 7.4 times its 30-day average volume.

Of the 47 analysts tracking the stock, 32 have maintained a 'buy' rating, 12 suggested 'hold,' and three recommend to 'sell' the stock, according to Bloomberg data.

Here's what brokerages said about HCL Tech:

Nirmal Bang

  • The brokerage has assigned a 'sell' rating to HCL Technologies with a target price of Rs 842, implying a downside of 23.5%.

  • The commentary from the IT majors points to a weaker-than-expected October to December quarter, the brokerage said.

  • HCL Tech has indicated that growth for FY23 will come at the lower end of the range that it had indicated post its Q2 FY23 results due to higher-than-expected furloughs, highlighting BFSI and Hi-Tech as problem areas.

  • Expect this to be an industrywide problem and not an HCL Tech-specific one.

Credit Suisse

  • Macro headwinds from the U.S. could drive a 10–27% valuation-led correction in the Indian IT services sector, said Credit Suisse in its report.

  • The brokerage assigned a 'neutral' rating to the scrip, implying that the stock’s total return is expected to be in line with the benchmark over the next 12 months.

  • The stock's price target was Rs 1,028.74.

Kotak Institutional Equities

  • The brokerage maintained a 'buy' rating on HCL Technologies as they expect consistent, industry-matching growth from the company.

  • The price target is fixed at Rs 1,250 for the stock.

  • HCL Tech said during its analyst meeting that the macro impact on discretionary spending and furloughs has been higher than anticipated.

  • The bookings trend is also robust, according to Kotak Institutional Equities.

Morgan Stanley

  • The brokerage retains an 'overweight' rating on the stock citing an upside.

  • Sharp rupee depreciation, better-than-expected margins, macro environment and acceleration in deal win momentum are a few positives for the scrip.

  • The target price has been set at Rs 1,100 for the scrip.

  • HCL Technologies' near-term update on the macro impact on demand/revenue was negative, but commentary on margins was comforting.

  • Expect limited earnings per share impact, but the stock could see near-term drag from lower price-to-earnings multiples.

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