HCL Technologies shares were trading higher on Monday, marking a second consecutive day of gains following a robust performance in the third quarter that prompted brokerages to raise earnings estimates for the IT major.

What Happened: HCL Tech reported a 6.23% year-on-year growth in third-quarter net profit to ₹4,351 crore and a 6.54% increase in consolidated revenue to ₹28,446 crore, beating estimates. The anticipation of strong results, driven by its ASAP acquisition and Verizon deal, contributed to a 4% pre-result gain.

Despite the third quarter being a seasonally weak period for Indian IT services companies, HCL Tech stood out due to its product vertical. Analysts noted that the revenue growth was propelled by seasonal gains in HCL Software (products and platform), which rose 34% sequentially.

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What Analysts Say: Following the strong quarterly results, Motilal Oswal and Nuvama Institutional Equities raised earnings per share estimates for the financial years ending 2024-2026 by 3-4% and 2-2.7%, respectively. Motilal Oswal reiterated a “buy” rating with a target price of ₹1,880, considering HCL as its top pick in IT Services for 2024. Nuvama maintained a “buy” rating with a target price of ₹1,780.

Key takeaways from the management’s conference call include a focus on achieving and sustaining a 20% margin trajectory in the long term and significant investments in generative AI. HCL Tech has signed 31 deals in generative AI, with most valued at sub-$1 million.

Despite positive sentiments, CLSA downgraded HCLTech to “underperform” from “outperform”, raising the target to ₹1,536 per share.

Price Action: HCL Tech’s share price was up 2.63% at ₹1,581.30 in morning trade on Monday. Overall, HCL Tech’s stock has continued to outperform its peers, gaining over 42% in the past year.

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