Jefferies reiterates 'Hold' on HCL stock amid cautious growth outlook

On Thursday, Jefferies maintained a Hold rating on HCL Technologies (HCLT:IN) stock with a price target of INR1,630.00. During its investor day, HCL Technologies outlined its medium-term strategy, focusing on achieving industry-leading organic growth compared to other Tier-1 IT firms and improving profitability.

The company has set its sights on double-digit growth over the medium term and is looking to GenAI as a key driver for both growth and improved profit margins.

The IT giant also anticipates mid-single digit growth in its Software division, with particular emphasis on expanding its footprint in the Indian and African markets. Despite the positive outlook on growth, HCL Technologies noted that the current demand is primarily driven by cost-reduction initiatives, while discretionary spending remains subdued.

The reaffirmed Hold rating by Jefferies comes as HCL Technologies expresses confidence in its strategic direction and growth potential. The company's focus on GenAI and targeted geographic expansion forms the core of its approach to outpace its peers in the IT sector.

HCL Technologies' investor day revelations provide a glimpse into the company's efforts to balance growth aspirations with profitability. The firm's expectation of double-digit growth reflects a positive stance on its operational capabilities and market opportunities.

As the company steers through a landscape marked by cautious spending, its emphasis on cost efficiency and strategic investments in technology such as GenAI could play a crucial role in sustaining its momentum. The maintained price target by Jefferies indicates a steady outlook for HCL Technologies' stock performance in the near term.

In other recent news, HCL Technologies reported first-quarter revenue for the fiscal year 2025 at $3,364 million, a 5.6% increase year-over-year but a 1.6% decrease quarter-over-quarter. The company's EBIT margin remained steady at 17.1%, aligning with consensus estimates. Following the announcement, Kotak Securities raised its price target for HCL Technologies to INR 1,740, maintaining an 'Add' rating.

InCred Research upgraded the company's stock rating from Reduce to Hold and raised the price target to INR1,576.00. However, Investec maintained its Sell rating on HCL Technologies, raising the price target to INR1,312.00.

Despite some challenges, HCL Technologies outlined its strategic focus areas for medium-term growth, cost reduction strategies, and a proactive approach to adopting generative AI to increase its market share.

The company anticipates growth across various verticals and geographies in the second quarter of the fiscal year 2025, with the exception of the Banking, Financial Services, and Insurance sector. These recent developments highlight HCL Technologies' ongoing efforts to navigate the current market challenges and expand its market share.

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