In recent recommendations, broking company Motilal Oswal Financial Services Ltd has advised investors to buy shares of HCL Technologies Ltd while adopting a neutral stance on Wipro Ltd's shares. According to Motilal Oswal, a buy recommendation indicates an expected return of over 15% over a 12-month period.
In a report, Motilal Oswal highlighted HCL Technologies' robust performance in Q3FY24, with a 6% quarter-on-quarter (QoQ) revenue growth in constant currency (CC) terms. The growth was attributed to seasonal gains in HCL Software (P&P), which increased by 34% QoQ. HCLT’s Services also showed a 3.1% QoQ growth in CC terms, with healthy performance in both the IT and ER&D verticals.
Motilal Oswal expressed positivity regarding HCLT's strong beat on both Services and P&P, especially amidst macro headwinds affecting key competitors. The broking company was impressed by the implied Q4 guidance for the Services vertical, indicating growth despite lower deal wins and a high base, contrasting with challenges faced by peers. Motilal Oswal reiterated a BUY rating for HCLT with a target price (TP) of Rs1,880.
As for Wipro, Motilal Oswal acknowledged the positive third quarter, highlighting the management commentary on higher deal wins in the Consulting vertical, suggesting improvement in overall growth. However, the weak 4QFY24 revenue growth guidance and unchanged commentary on demand and discretionary spending raised concerns.
Maintaining a neutral stance on Wipro's shares, Motilal Oswal set a target price of Rs520 based on 19x FY26E earnings per share (EPS). Despite expecting Wipro to return to growth in FY25 after a decline in FY24, Motilal Oswal anticipates lower revenue growth than peers due to a weak base. Wipro shares are currently trading around Rs498 on the BSE.
(With Agency Inputs)
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