Shares of HCLTech, India’s third-largest IT services company, plummeted by over 9% on January 14, 2025, following the release of its Q3 results. Despite largely meeting earnings expectations, a slight upward revision in the company’s revenue guidance for FY25 raised concerns about a potentially weaker-than-expected Q4, dampening market sentiment and causing a significant dip in HCLTech shares.
HCLTech Q3 Performance Overview
In Q3 FY25, HCLTech reported a 3.6% quarter-on-quarter (QoQ) increase in revenue, which rose to ₹29,890 crore, compared to ₹28,862 crore in Q2 FY25. On a USD basis, revenue increased by 2.6%, reaching $3,533 million from $3,445 million sequentially. However, this performance came with a few challenges that affected the stock.
The company’s EBIT (earnings before interest and taxes) rose by 8.6% to ₹5,821 crore, up from ₹5,362 crore in the previous quarter. The EBIT margin improved by 90 basis points to 19.6%, from 18.7% in Q2 FY25. HCLTech also declared an interim dividend of ₹12 per share, and a special dividend of ₹6 per share, which was a positive sign for shareholders despite the stock’s recent decline.
Concerns Over HCLTech Q4 Outlook
Despite the growth in HCLTech’s revenue, the company revised its revenue growth guidance for FY25, which created some uncertainty among investors. The guidance now forecasts a 4.5%-5% revenue growth in constant currency terms, compared to the earlier range of 3.5%-5%. This upward revision was attributed to planned reductions in a major telecom deal and delays in ramping up certain discretionary projects, both of which could contribute to a softening in Q4 FY25.
As a result, HCLTech shares took a hit, dropping over 9% to ₹1,804.65 per share on the NSE. This negative market reaction stemmed from concerns about how these factors might affect the company’s growth trajectory for the remainder of the fiscal year.
Should You Buy, Sell, or Hold HCLTech Shares?
Analysts are divided on the future of HCLTech shares following the Q3 results. Emkay Global analysts have downgraded their EPS estimates for FY25-27 by 0.3%-1.7% due to the weaker-than-expected Q3 performance. However, they have maintained their “Add” rating on HCLTech shares with a target price of ₹2,000 per share, citing the company’s strong fundamentals and long-term growth potential.
Nuvama Institutional Equities remains generally optimistic about HCLTech, acknowledging its superior growth compared to competitors. However, they have downgraded the stock to “Hold,” slightly raising the target price to ₹2,150 per share, from ₹2,125. Their revised target price reflects a full valuation based on FY26E PE multiples.
Despite these revisions, analysts remain confident in HCLTech strong deal pipeline and free cash flow generation, which supports a solid long-term growth outlook for HCLTech shares.
Short-Term Strategy: Buying Opportunities for HCLTech Shares
According to Sumeet Bagadia from Choice Broking, the dip in HCLTech shares presents an opportunity for investors looking to buy on dips. He noted that the stock has strong support at ₹1,710 per share, and he recommends accumulating more shares near this level, with a stop loss set at ₹1,710. Bagadia predicts that HCLTech shares could rebound to ₹1,800 in the short term, and with a potential trend reversal on the horizon, the stock could rise further to ₹1,900-₹1,950 once it breaks through the ₹1,800 resistance.
HCLTech Long-Term Growth Potential
Despite near-term challenges, HCLTech shares have a solid foundation for long-term growth. The company’s strong deal pipeline, coupled with effective capital allocation and operational excellence, positions it well to continue growing in the highly competitive IT services sector. HCLTech’s focus on discretionary spending and its ability to navigate market volatility makes it an attractive stock for investors with a longer-term perspective.
Conclusion: What Should You Do with HCLTech Shares?
The dip in HCLTech shares presents both challenges and opportunities. While the revised revenue guidance for Q4 FY25 raises concerns, HCLTech remains well-positioned for long-term growth, backed by a strong deal pipeline and solid fundamentals. Short-term traders may see the recent decline as an opportunity to buy on dips, especially near the ₹1,710 support level. Long-term investors may choose to hold on to their shares, given the company’s solid growth trajectory.
For those looking to buy, sell, or hold, the key will be to monitor HCLTech Q4 performance, updates on its major deals, and any potential changes to its revenue guidance. Given the company’s track record and growth outlook, HCLTech shares could still offer strong returns for patient investors.
Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Always do your own research or consult a financial advisor before making any investment decisions.
read more about stock news niftynews