Morgan Stanley Adjusts Rating on HCL Technologies, Analysts Shift to Equalweight, Price Target Increased to INR1,840.00
In a recent update, Morgan Stanley revised its stance on HCL Technologies (HCLT:IN) from Overweight to Equalweight, while raising the price target to INR1,840.00 from INR1,705.00. The adjustment reflects the analyst's perspective on HCL Technologies' performance in the Services business and growth outlook from fiscal years 2022 to 2024, noting a softer order book growth compared to its peers.
The firm highlighted HCL Technologies' strong execution of its order book, contributing to its growth in recent years. However, larger cap peers like Infosys (NS:) are expected to have a more favorable revenue growth outlook for fiscal year 2025, potentially leading to revenue guidance upgrades that may not be as likely for HCL Technologies.
The analyst also mentioned the potential for margin improvement at HCL Technologies, indicating room for upside. However, near-term catalysts driving further stock price growth appear limited at present. Despite the company's strong performance in recent years, closing the valuation gap with Infosys, a further re-rating for HCL Technologies would require continued outperformance in revenue growth or margin convergence, neither of which are present in Morgan Stanley's base case projections. As a result, the risk-reward profile for HCL Technologies is now considered balanced, prompting the shift to an Equalweight rating.
In conclusion, investors should consider the revised rating and price target for HCL Technologies in light of the company's growth prospects and potential challenges compared to its peers. Make informed decisions based on the analysis provided to optimize your investment strategy and financial outcomes.