Morgan Stanley has upgraded HCLTech to Overweight, raising the target price to Rs 1970, following a better-than-expected Q2 FY25 performance and positive commentary on improving demand. The brokerage also cited earnings per share (EPS) upgrades as a result of the strong quarter.
HCLTech reported impressive Q2 FY25 results, with dollar revenue rising by 2.4% quarter-on-quarter to $3445 million from $3364 million. In rupee terms, revenue increased by 2.9% to Rs 28,862 crore, up from Rs 28,057 crore. The company’s EBIT stood at Rs 5,362 crore, up from Rs 4,795 crore, with an EBIT margin improving to 18.6% from 17.1%.
Despite these gains, profit after tax (PAT) saw a slight decline of 0.5%, dropping to Rs 4,235 crore from Rs 4,257 crore in the previous quarter. This decline was attributed to lower other income, which offset the margin improvements.
Morgan Stanley highlighted HCLTech’s consistent industry-leading revenue growth, which should support the company’s premium multiples. The firm believes that improving order bookings will be crucial for sustaining growth momentum into FY26. The positive Q2 results and constructive outlook on demand led to upgrades in HCLTech’s EPS estimates.
Overall, Morgan Stanley’s upgrade to Overweight and the increase in target price reflect confidence in HCLTech’s robust performance and growth potential, even as it acknowledges the importance of maintaining strong order bookings to continue this trajectory. The brokerage remains Equal-weight on valuations, indicating a balanced view of potential risks and rewards at current price levels.
