Shares of HCL Tech closed in the red on Thursday, completing the day 0.83% fall at ₹1,741.85. Despite a 22% surge in the last three months, Kotak Institutional Equities devalued the IT company from an ‘add’ to a ‘lower’ rating, mentioning full valuations and growth challenges.
Over the past month, HCL Tech’s share price has risen by 5%, and over the past year, it has increased by 35%. The stock is now trading at a 9% and 4% discount to TCS and Infosys, respectively, which is much less than its five-year historical average. Now, the stock is valued at 26 times its evaluated FY2026 earnings.
Kotak Institutional Equities reported that while HCL Tech can have strong growth, the stock is fully valued. Challenges include the anniversary of the Verizon deal and fair deal succeeds in recent quarters, which limit visibility for change in FY2026. The total contract value of deal wins has been average since the Verizon deal, and the outlook for mega deal-driven revenue in FY2026 remains uncertain.
The brokerage firm highlighted that HCL Tech’s portfolio mix might limit its recovery relative to peers due to lesser exposure to BFS (Banking and Financial Services) in the US, where growth recovery is stronger. Additionally, higher exposure to retail, CPG (Consumer Packaged Goods), and manufacturing sectors, which face incremental headwinds, and an underperforming ERD (Engineering and R&D) segment, could impact growth.
Despite these challenges, Kotak is impressed with HCL Tech’s diversified portfolio, progress in applications, positioning in GenAI, and strong cash generation. However, they believe the stock is fully valued at 26X FY2026 earnings and await a better entry point for investors.
At 1 pm on Thursday, HCL Tech shares were quoted at ₹1,737.65 on the NSE, down 1.1% from the previous session’s closing price.
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