HCL Technologies vs TCS: Following the announcement of strong Q1FY24 results by the Indian IT major, investors may find it difficult to choose between two IT stocks when the Indian stock market opens today. While TCS shares rose on Friday following the announcement of TCS's Q1FY25 results on Thursday, experts are expecting further gains in IT stocks and bulls are expected to react strongly to HCL Tech shares following the strong performance of HCL Tech. HCL Tech will announce its Q1FY24 results on Friday and the stock price reaction is expected on Monday.
Siddhesh Mehta, research analyst at SAMCO Securities, expects a strong rally in India's IT sector after TCS and HCL Tech announce their Q1FY24 results, saying, “Following TCS's strong earnings announcement, Indian IT giant HCL Technologies also beat its Q1FY25 profit estimates, reporting strong revenue and profit growth of 7% and 21% year-on-year, respectively. TCS's strong performance helped the Nifty IT index surge 4.53% on Friday and close near its all-time high over the weekend. With HCL Tech's stellar results, the upward trend is likely to continue and Monday could be another big day for the Indian IT sector.”
TCS vs HCL Tech Results
Comparing TCS and HCL's Q1 2024 performance, Sugandha Sachdeva, founder, SS WealthStreet, said, “TCS, India's largest IT company, reported quarterly results in June that beat market expectations on the back of healthy execution and increased large deals. The results reflect overall execution in both improving margins and revenue growth. The company reported net profit grew 9% YoY to 11.5%. ₹Revenue rose to Rs 1,204 crore, up 5.4% year-on-year, driven by growth in most verticals. The company also declared an interim dividend of Rs 1,204 crore. ₹“The company is constantly pursuing innovation and strengthening customer relationships, and the deal pipeline remains strong as Gen AI projects gain traction. Our first quarter results demonstrate a recovery in demand and an improving growth trajectory.”
“HCL Tech's results beat all expectations, but concerns remain over the company's FY25 growth. Net profit included a one-time gain from the sale of its joint venture with State Street, which will also significantly impact Q2 sales. The health of sales was supported by robust growth in telecom and retail segments, offsetting declines in healthcare and utilities. Sales were also supported by healthy growth in the software segment, which was expected to decline due to seasonality,” said Manish Chowdhury, head of research at Stocksbox.
“HCL Tech also delivered better than expected performance in the June quarter with consolidated PAT growing 20.4% YoY to 10.3%. ₹4,257 crore. Net profit grew 6.8% quarter-on-quarter. However, revenue declined 1.9% in Q1FY25 after growing 6.7% YoY. India's third-largest IT services company expects constant currency revenue growth of 3-5% YoY and EBIT margin of 18-19% in FY25. The IT major has declared an interim dividend of Rs 1,257 crore. ₹“The dividend of $12 per share marks the 86th consecutive quarter of dividend payments. The company's growth trajectory looks positive with new contract wins and we expect strong demand due to increasing adoption of emerging technologies such as generative AI,” Sugandha added.
TCS vs HCL Tech: Which Stock to Buy
On the question of which IT companies will perform better in Q1FY24, Avinash Gorakshkar, head of research at ProfitMart Securities said, “TCS delivered better than expected numbers and maintained its overall revenue growth and strong outlook for FY25. HCL Tech's results also beat market expectations, but HCL Tech's revenues fell and its growth outlook for FY25 is weaker. This means that TCS performed better in Q1FY25 than HCL Technologies,” Gorakshkar suggested buying TCS shares over HCL Tech shares once Indian stock markets reopen next Monday.
“In terms of share price outlook, both the stocks look promising on a one-year outlook, but TCS stock currently looks slightly more attractive owing to its consistent growth profile, high ROIC, healthy margins and solid execution. TCS stock is ₹It has risen to $3,600 and is expected to rise further in the medium to long term. Although the stock price looks a bit expensive after eight consecutive quarters of sharp increases, ₹3,600 to 3,650 could be an opportunity to take advantage of the upward momentum and aim for higher levels around 3,600 to 3,650. ₹4,700,” Sugandha Sachdeva predicted. ₹The medium term target for TCS shares is 5,000 shares.
“HCL Tech stock is ₹It could reach the 1,250 level, but the stock price ₹The 1,697 mark is a lifetime high; if it surpasses this, ₹From 1,950 ₹2,000. Though some corrective decline cannot be ruled out after the recent surge, as long as the above support holds on a closing basis, a dip strategy looks prudent,” Sugandha concluded.
Disclaimer: The views and recommendations expressed above are those of the individual analysts or brokerage firms and not those of Mint. You are advised to check with a qualified professional before making any investment decisions.
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