HCL Tech shares rise after analysts raise estimates post increased guidance

HCL Tech raised its full-year revenue guidance on Wednesday and narrowed its EBIT Margin guidance. The company expects revenue growth for the full-year to be in the 13.5-14.5 percent range from the earlier guidance of 12-13 percent led by strong growth in the first half of the year and deal wins.

Healthy deal wins of nearly $2.5 billion during the quarter and a robust pipeline gives comfort to Nomura. The brokerage has raised its Earnings per Share (EPS) estimates for the current and upcoming financial year by 4 percent. It has also raised its price target on the company by a similar quantum to Rs 980. However, the firm has maintained its neutral recommendation on the stock.

The company's management told reporters on Wednesday that the demand for tech services continues to be very high, adding that the strong order booking in the first half of the year will translate into healthy revenue growth in the second half.

Macquarie, who has been anti-consensus when it comes to its bullish stance on Indian IT, has maintained its outperform rating on HCL Tech with a price target of Rs 1,420. It termed the company's performance to be good all around without any one-offs. The firm also said that the improvement in the company's services margin puts to rest the concerns about the decline in the June quarter.

HCL Tech's EBIT margin expanded nearly 100 basis points from the June quarter despite the annual wage hikes that it undertook during the quarter. CLSA believes that the margin improvement should lower skepticism over the company's ability to meet its guidance for the year. The brokerage has maintained its outperform rating on the stock while raising its price target to Rs 1,050 from Rs 1,000 previously. The stock is also part of CLSA's India Focus Portfolio.

However, not everybody shares the street's optimism on HCL Tech.

JPMorgan may have raised its price target on the stock to Rs 850 from Rs 820 earlier, but it maintains its underweight rating on the stock. The firm believes that the company's guidance is ambitious considering the deteriorating macros and a moderating demand environment. It also said that the 100 basis points improvement in margin will be impossible to repeat as macros worsen.

UBS has also maintained its neutral rating on the stock and its price target of Rs 965 is near the current market price. It highlighted the management commentary on acceration in cost savings projects as clients begin to prepare for tough times.

Out of the 46 analysts that have coverage on HCL Technologies, 30 have a "buy" recommendation, 12 say "hold" while four have a "sell" rating.

Shares of HCL Technologies are up 3.3 percent in early trading at Rs 983.35 and are among the top gainers on the Nifty 50 index.