HCL Technologies Share Price Target at Rs 1,850: Sharekhan Research
Mirae Asset Sharekhan has reiterated a BUY recommendation for HCL Technologies, spotlighting the company’s robust fundamentals, strategic pivot towards AI-led growth, and disciplined execution amidst margin turbulence. Despite a muted Q1 and persisting near-term headwinds, HCL Tech is anticipated to deliver industry-leading growth among Tier-1 IT peers. With a target price of Rs 1,850 and a current market price of Rs 1,620, the stock presents notable upside for long-term investors. The research underscores HCLTech’s positioning, operational resilience, and the crucial metrics guiding investment decisions for the coming quarters.
Buy Call Reaffirmed with Strategic Rationale
Investment house Mirae Asset Sharekhan maintains a “Buy” on HCL Technologies, targeting Rs 1,850, anticipating an inflection in performance as AI, deal bookings, and global IT modernization drive future growth. This call comes on the back of moderate revenue growth in Q1FY26 and a recalibration of margin guidance, balanced by long-term demand resilience and the company’s diversified digital portfolio.
Earnings Snapshot and Performance Metrics
HCLTech reported consolidated Q1FY26 revenues of $3,545 million, marking a sequential uptick of 1.3% and annual growth of 5.4%. In rupee terms, net sales stood at Rs 30,349 crores, up 0.3% quarter-on-quarter and 8.2% year-on-year.
Net profit for the quarter was Rs 3,843 crores, down 9.7% YoY and 10.8% QoQ, falling short of analyst expectations due to a drop in EBIT margin to 16.3%. This margin contraction—down 160 basis points quarter-on-quarter—was attributed to lower utilization, client bankruptcy, increased sales/marketing expenditure, and restructuring outlays.
Despite headwinds, management increased the revenue growth floor for FY26 to 3-5% (constant currency), although EBIT margin guidance was lowered to 17-18% from 18-19%.
Stock Levels and Investor Targets
Below is a summary of key levels for HCL Technologies stock based on the latest research:
| Current Market Price (CMP) | Target Price | 52-Week High | 52-Week Low | Valuation Basis |
|---|---|---|---|---|
| Rs 1,620 | Rs 1,850 | Rs 2,011 | Rs 1,304 | 25x FY27E EPS |
Key Positives: Navigating Uncertainty with Resilience
Steady bookings highlighted by new deal TCVs of $1,812 million in Q1, despite an 8% YoY decline, signal continuing customer demand across geographies and verticals. The company’s long-term contract wins fortify revenue visibility, even as near-term deal closure was affected by procedural slippage.
HCLTech’s lead in AI and generative AI platforms (AI Force and AI Foundry) augments its differentiation in the market, helping to secure substantial transformation deals. The firm also benefits from declining attrition (12.8% LTM)—a positive indicator for talent stability—and robust cash flows, with free cash flow for the last twelve months at $2,421 million and a net cash balance of $3,187 million.
Key Risks: Margin Pressure and External Shocks
The EBIT margin contraction—falling to 16.3% in Q1FY26 from the previous quarter’s 18.0%—was the primary sore point, reflecting underutilization, sector-specific challenges (notably in automotive), and higher operating expenses. Additional one-time restructuring costs are expected to weigh on Q2 and Q3 margins.
Macro headwinds, including rupee appreciation, cross-currency volatility, and a tepid discretionary spending environment in the US and Europe, may temper revenue momentum. Yet, HCLTech’s all-weather, sector-diversified portfolio and expanding client relationships offer insulation against global uncertainty.
Vertical and Geographic Trends
Vertical-wise, technology and services, telecommunications, and retail & CPG outperformed, delivering year-over-year CC growth of 13.7%, 13%, and 8.2%, respectively. Conversely, manufacturing, life sciences, and public services experienced contraction.
Regionally, Europe and RoW led growth with 9.6% and 15% YoY CC gains, while the US, though stabilizing, grew modestly at 0.5%.
Financials and Valuation Table
| Metric | FY24 | FY25 | FY26E | FY27E |
|---|---|---|---|---|
| Net Sales (Rs cr) | 1,09,913 | 1,17,055 | 1,24,961 | 1,32,472 |
| EBITDA Margin (%) | 22.0 | 21.8 | 21.0 | 22.0 |
| Net Profit (Rs cr) | 15,702 | 17,391 | 17,498 | 20,137 |
| EPS (Rs) | 57.9 | 64.1 | 64.5 | 74.2 |
| ROE (%) | 23.5 | 25.2 | 24.3 | 26.3 |
| PER (x) | 28.0 | 25.3 | 25.1 | 21.8 |
Management Strategy and Forward-Looking Guidance
Management has articulated confidence in ramping up growth, especially within financial services, and expects quick turnaround on deferred large deals in Q2. The company’s ongoing restructuring is aimed at optimizing overseas operations and mitigating skill-location mismatches, particularly in the automotive vertical.
Outlook for FY26 remains optimistic, centered on AI innovation, aggressive new client acquisitions, operational efficiency, and the resilience of diversified sector exposure.
Bottomline: Strategic Entrant in the AI Era, Stick with the Leaders
In summary, HCL Technologies stands out as a formidable contender among Indian IT majors, leveraging sectoral growth, operational agility, and a robust digital strategy to transcend a challenging macro climate. The persistent turbulence in margins is no doubt a watch factor; however, as Mirae Asset Sharekhan’s Buy reiteration affirms, the combination of steady deal flow, AI advantage, and balanced financials makes HCLTech one of the key bets for investors seeking exposure to transformative technology plays in India’s capital markets. Hold with conviction for potential re-rating toward Rs 1,850 as the outlook solidifies and the global IT spending cycle recovers.
