JPMorgan sees premium valuation for HCL Technologies stock amid revenue surge

On Tuesday, JPMorgan adjusted the firm's stance on HCL Technologies (NS:HCLT:IN), upgrading the stock from Neutral to Overweight and increasing the price target to INR 2,250.00, up from the previous target of INR 1,780.00. The revision reflects the incorporation of the CTG acquisition into JPMorgan's financial forecasts, which is expected to boost the company's constant currency revenue growth by 3% over the fiscal years 2026-2027.

JPMorgan anticipates that HCL Technologies will be the fastest-growing large-cap company during the fiscal years 2026-2027. This projection is based on the company's performance and potential, which, according to JPMorgan, warrants a valuation multiple comparable to industry peers such as Infosys (NS:INFY) and Tata Consultancy Services (NS:TCS). Consequently, the target price-to-earnings (PE) multiple has been increased from 25.5 times to 29.5 times. This multiple represents a slight premium over TCS and a slight discount to Infosys.

The analyst's optimism stems from HCL Technologies' portfolio composition, which is believed to be relatively less dependent on discretionary spending outside of the Banking, Financial Services, and Insurance (BFSI) sector. In an environment where discretionary expenditures have not fully rebounded beyond BFSI, HCL Technologies is expected to continue outperforming its peers in terms of growth.

The upgrade and new price target take into account the strategic benefits of HCL Technologies' recent acquisition and its impact on the company's long-term revenue trajectory. The firm's analysis suggests that the acquisition will significantly contribute to the company's revenue growth over the next few years.

HCL Technologies' stock adjustment by JPMorgan is based on a detailed evaluation of the company's growth prospects, competitive positioning, and potential market performance. JPMorgan's comments indicate a positive outlook for the company, as it is poised to leverage its portfolio in a challenging economic climate where growth is paramount.

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