HCL Technologies Recommended as a Buy with a Price Target of Rs 1560: LKP Research

HCL Technologies Reports Soft FY26 Performance Amid Persistent Demand-Side Pressures

HCL Technologies Ltd (HCL) has released its research report, highlighting the company's muted quarterly performance and soft fiscal year 26 (FY26) results. The report indicates that the company's demand-side pressures and margin volatility persist due to restructuring costs.

According to the report, HCL's Q4 FY26 revenue stood at USD 3.68 billion, a decline of 3.3% quarter-over-quarter (QoQ). However, the revenue grew 2.4% year-over-year (YoY) in constant currency (CC) terms. The decline in revenue is attributed to continued weakness in discretionary spending across key verticals, cautious client behavior, and slower deal rampups.

The report also states that HCL's EBIT margins contracted 200 basis points (bps) QoQ to 16.5%, falling below expectations. This contraction is driven by an unfavorable revenue mix, restructuring costs, and ongoing investments in capabilities.

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Outlook and Valuation

Factoring in the impact of AI-led disruption, sustained weakness in discretionary spending, deflationary pressures from General Artificial Intelligence (GenAI), and heightened geopolitical uncertainties, the research firm has moderated its growth and margin assumptions. As a result, the firm has reduced its valuation of HCL with a revised target price (TP) of ₹1,560, based on 20 times FY28 estimated earnings per share (EPS). Despite this reduction, the firm maintains its BUY rating on HCL.

Note: CC stands for constant currency.

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