Chennai
Motilal Oswal Financial Services Ltd, a leading broking company, has recommended investors to buy shares of HCL Technologies Ltd (HCLT) while maintaining a neutral stance on Wipro Ltd’s shares. According to Motilal Oswal, the buy recommendation for HCLT suggests that the stock is expected to provide a return of over 15% over a 12-month period. In its report, Motilal Oswal highlighted HCLT’s robust performance in Q3FY24, achieving a 6% quarter-on-quarter (QoQ) revenue growth in constant currency (CC) terms. The growth was attributed to seasonal gains in HCL Software (P&P), which witnessed a 34% QoQ increase. HCLT’s Services grew by 3.1% QoQ in CC terms, showing healthy growth in both the IT and ER&D verticals. Motilal Oswal expressed optimism about HCLT’s strong beat on both Services and P&P, even amidst macro headwinds affecting competitors. The broking company emphasized HCLT’s ability to provide growth guidance for the Services vertical in Q4, indicating growth despite lower deal wins and a high base, which contrasts with challenges faced by peers. Given HCLT’s strong growth guidance and margin performance in a challenging demand environment, Motilal Oswal expects investor confidence to increase, potentially reducing the valuation gap with larger Tier-1 peers. HCLT remains Motilal Oswal’s top pick in IT Services coverage for 2024, and they reiterate a BUY rating with a Target Price (TP) of Rs 1,880. On the other hand, Motilal Oswal highlighted the positive aspects of Wipro’s third quarter, citing improvement in the Consulting vertical and positive management commentary on higher deal wins. However, concerns were raised about Wipro’s weak 4QFY24 revenue growth guidance, unchanged commentary on demand and discretionary spending, leading Motilal Oswal to maintain a neutral stance on Wipro’s scrip with a target price of Rs 520 based on 19x FY26E EPS. Wipro shares are currently trading at around Rs 498 on BSE.
