HCLTech shares gain nearly 5% as net profit beats estimates; Should you buy, hold or sell IT stock?

Shares of HCLTech in early trade on July 15 climbed nearly 5 per cent to day's high price of Rs 1,635.85 after the company came up with better-than-expected Q1FY25 earnings. For the April-June quarter, the IT services company registered a 6.8 per cent sequential increase in its net profit to Rs 4,257 crore for the June quarter. Zee Business analysts had pegged the IT major's quarterly net profit at Rs 3,800 crore. 

In the year-ago period, the company reported a consolidated net profit of Rs 3,534 crore, a 20 per cent on-year growth.

In Friday's session, ahead of the company's Q1 results, its stock amid buoyancy in the entire IT basket ended over 3 per cent higher at Rs 1560.4.

Noida-headquartered IT company's revenue rose to Rs 28,057 crore as against estimates of Rs 27,930 crore and reporting a 1.6 per cent decline sequentially.  Nevertheless, margins at the company came in lower at 17.1 per cent as against 17.6 per cent clocked in the March quarter. 

The IT major has retained its FY25 guidance, with revenue growth in constant currency terms pegged at 3-5 per cent, while EBIT margin is at 18-19 per cent. 

Meanwhile, the company declared an interim dividend of Rs 12 per equity share for FY25 with the record date listed as July 23. 

Should you buy, hold or sell HCLTech shares after Q1FY25 earnings?

The global brokerages remained split on the stock's outlook. Here is how global brokerages rate the stock together with the rationale and target price.

Nomura continues with its buy rating on the counter with the target raised to Rs 1,720 from the earlier Rs 1,700. The brokerage is of the view that the company is well on track to achieve FY25 revenue growth guidance. , Also, it added that the GenAl impact will likely vary across service lines.

Jefferies on the other hand continued with its hold rating with the target raised to Rs 1,630 from the earlier Rs 1,390 as 1Q largely in-line however the brokerage anticipated profit ahead due to gains from StateStreet divestiture.

Macquarie, meanwhile, maintains an outperform call on the stock with the target pegged at Rs 1,800, implying potential gains of over 15 per cent from the last close. The brokerage noted that the EBIT margin expanded for IT & Business Services; but dropped sharply for ER&D.

CLSA-the Hong Kong-based brokerage, however, keeping a bearish stance has downgraded the stock to hold from the earlier outperform rating. Also, it has cut the target marginally to Rs 1,556. The brokerage pointed out that the sequential decline in revenue was largely due to offshoring of a large contract in the BFSI vertical. Furthermore, the decline is also due to productivity benefits passed on to large customers every year during Q1. The company's EBIT margin at 17.1 per cent is inlin lineine with the consensus, it added.