Investors face a dilemma as the Indian stock market opens today, with both HCL Technologies and TCS delivering impressive Q1 results for 2024. While TCS shares saw an upward movement on Friday following the announcement of its Q1FY25 results, experts predict further gains. Simultaneously, HCL Tech shares are expected to see a bullish reaction after reporting strong Q1 results on Friday, with stock movement anticipated today.
Analysts are optimistic about the Indian IT sector’s performance post-Q1 results from TCS and HCL Tech. Siddhesh Mehta, Research Analyst at SAMCO Securities, notes that HCL Technologies surpassed Q1FY25 earnings expectations with a notable 7% year-on-year increase in revenues and a 21% rise in profits.
Following TCS’s robust earnings, the Nifty IT index surged by 4.53% on Friday, nearing its all-time high. With HCL Tech’s impressive results, this positive trend is expected to continue, making today a potentially significant day for the Indian IT sector.
Comparing the Q1 results of TCS and HCL, Sugandha Sachdeva, Founder of SS WealthStreet, highlights that TCS reported strong quarterly results, exceeding market estimates due to healthy execution and the ramp-up of mega and large deals. TCS saw a net profit growth of 9% year-on-year to ₹12,040 crore, with revenue from operations increasing by 5.4%.
The company declared an interim dividend of ₹10 per share and continues to focus on innovation and strengthening client relationships, particularly in Gen AI projects. These results indicate a demand recovery and an improving growth trajectory for TCS.
On the other hand, HCL Tech delivered results that beat all estimates, but concerns about its growth in FY25 remain. Manish Chowdhry, Head of Research at Stoxbox, points out that HCL Tech’s net profit included a one-time gain from the divestment of a JV with State Street, which will significantly impact Q2 topline. Despite this, the company reported a 20.4% year-on-year rise in consolidated PAT to ₹4,257 crore for Q1FY25.
Revenue witnessed a slight drop of 1.9% for Q1FY25 compared to the previous quarter, although it rose by 6.7% compared to the same quarter last year. HCL Tech has also declared an interim dividend of ₹12 per share, marking its 86th consecutive quarter of dividend payout. The company’s growth trajectory appears positive as new deals are won, and they anticipate strong demand due to the increasing adoption of emerging technologies like Generative AI.
Avinash Gorakshkar, Head of Research at Profitmart Securities, suggests that TCS has delivered better-than-expected numbers, maintaining its revenue growth and strong outlook for FY25. In contrast, HCL Tech’s revenue has slipped, and its growth outlook for FY25 is weak. This suggests that TCS has outperformed HCL Technologies in Q1 results for FY25. Gorakshkar advises buying TCS shares over HCL Tech shares when the Indian stock market reopens today.
Both stocks are promising from a one-year perspective, with TCS share price appearing slightly more attractive due to its consistent growth profile, strong ROIC, healthy margins, and robust execution. TCS shares have formed a strong base at ₹3,600 and look poised for further gains from a medium to long-term perspective. Although the stock appears slightly stretched after surging for eight quarters in a row, a cool-off in prices towards the ₹3,600 to ₹3,650 range could present an opportunity to capitalize on the upward momentum, targeting higher levels around ₹4,700.
HCL Tech shares have established a base at ₹1,250, but the stock is likely to face some resistance at ₹1,697, its lifetime high. Once it surpasses this mark, it can extend its march towards ₹1,950 to ₹2,000. Some corrective dips cannot be ruled out after the recent surge, but as long as the support level holds on a closing basis, a dip strategy looks prudent.
