HCL Tech retains FY27 guidance as brokerages weigh margins against muted growth
HCL Technologies maintained its fiscal year 2027 revenue and margin guidance following a mixed first-quarter performance, leaving analysts divided on whether its premium valuation is justified amid broader industry headwinds.
HCL Technologies retained its fiscal year 2027 constant currency guidance after reporting first-quarter revenue of 34,579 crore rupees ($3.65 billion). While this represented a 2.6 per cent year-on-year increase, it marked a 0.5 per cent sequential decline in constant currency terms.
The Indian IT major expects overall revenue growth of 1 to 4 per cent for the full year, alongside services revenue growth of 1.5 to 4.5 per cent. Management also maintained its target for an EBIT margin between 17.5 and 18.5 per cent.
Despite securing $2.4 billion in net new deal bookings, including a contract exceeding $1 billion in early July, meaningful revenue contribution from the latter will not materialise until the first quarter of fiscal 2028. This delayed ramp-up, coupled with continued weakness in two specific accounts, has kept the near-term outlook muted.
Brokerage reactions highlight a clear divide over the company’s valuation. Nomura maintained a buy rating with a revised target price of 1,290 rupees, citing revenue that exceeded expectations. The firm raised its fiscal 2027-28 revenue growth forecast to 3.1-5.3 per cent, factoring in a $45 million contribution from the recent JasperSoft acquisition.
Conversely, JM Financial issued a reduce rating with an 1,100 rupee target price, pointing to a 10 per cent downside. Although the firm acknowledged that services revenue and margins beat estimates, it warned that the stock trades at 16 times fiscal 2028 earnings. This represents a 17 per cent premium to Infosys despite a comparable organic growth profile.
Emkay offered a more constructive view, maintaining an add rating and a 1,250 rupee target. The brokerage highlighted a 40 basis point improvement in EBIT margin to 16.9 per cent and a 10.6 per cent sequential jump in advanced AI revenue to $171 million. Emkay also welcomed the planned 3,500 crore rupee investment in a 50-megawatt AI data centre as a strategic long-term move.
Other analysts remain cautiously neutral. Nuvama lowered its target price to 1,300 rupees while keeping a hold rating, describing the broader outlook as guarded. Meanwhile, 360 One raised its target to 1,200 rupees, arguing that the company is better equipped to handle pricing pressure. However, it noted that industry-wide headwinds will likely cap immediate expansion, valuing the stock at 15 times fiscal 2028 earnings based on an 11.4 per cent earnings compound annual growth rate.
