HCLTech Q3 Results Review: Brokerages Hike Target Price After ‘Standout Performance’
Shares of HCLTech will be in focus heading into trade on Tuesday after the company reports its third-quarter earnings for the financial year ending March 2026. The IT giant reported a consolidated bottom-line of Rs 4,076 crore in the October-December period, compared to Rs 4,235 crore in the preceding quarter, according to an exchange filing on Monday.
Analysts’ consensus estimate compiled by Bloomberg projected the profit to grow by 11% to Rs 4,702 crore. However, the company’s actual profit fell short of expectations, primarily due to an estimated one-time increase in provision for employee benefits of Rs 956 crore, resulting from the implementation of the New Labour Codes.
Brokerage Ratings and Target Price Revisions
In the wake of HCLTech’s Q3 earnings, a slew of brokerages came out with a positive note on the IT giant, with the likes of Morgan Stanley, Citi, and Kotak Securities hiking target price on the counter.
Morgan Stanley maintains an Equal-weight rating and raises the target price to Rs 1,760 from Rs 1,680. The brokerage cites a ‘standout performance’ by HCLTech, with Q3 performance surprising positively, prompting an upgrade to the full-year outlook. Growth visibility into FY27 appears slightly better than earlier, with margins expected to normalize around an 18% base next year. However, the brokerage sees limited upside from current levels, given the strong recent performance is already reflected in premium valuations.
Kotak Securities maintains a Reduce rating and raises the target price to Rs 1,680 from Rs 1,500. The quarter was solid overall, driven by the products segment, with services performance moderately better than expected. Net-new bookings were strong, supported by a large deal win. However, the brokerage sees limited scope for meaningful EBIT margin expansion, given a cost takeout-led demand environment continues to cap margin upside. Valuations remain rich, with the stock trading at a premium to peers.
Citi maintains a Neutral rating and raises the target price to Rs 1,700 from Rs 1,670. Q3 performance and deal TCV were better than expected, with forward-looking indicators remaining stronger than peers. Management is focused on identifying and tapping new spending areas. Citi has raised FY27 and FY28 earnings estimates by 2% each. However, the brokerage maintains a cautious stance on the IT services sector.
Investor Takeaways and Market Implications
The hike in target price by several brokerages is a positive development for HCLTech, indicating a ‘standout performance’ by the company. However, investors should exercise caution, given the rich valuations and limited scope for meaningful EBIT margin expansion. The Indian stock market is likely to remain volatile, with the Nifty and Sensex indices expected to be influenced by global market trends and domestic economic developments.
Investors should keep a close eye on the IT sector, given its significant contribution to the Indian economy. The implementation of the New Labour Codes is likely to have a significant impact on the sector, with companies like HCLTech expected to benefit from the new regulations. However, the Indian economy is facing several challenges, including a slowdown in growth and rising inflation, which could impact the Indian stock market and the IT sector.
