HCLTECH - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:15 pm

Fundamental Rating: 4.1

📊 Core Financials

• Revenue & Profit Growth: Quarterly PAT declined from 2,888 Cr. to 2,657 Cr. (↓ 8%), YoY profit variation at -17.4% shows earnings pressure.
• Margins: ROCE at 43.1% and ROE at 32.6% indicate excellent efficiency and profitability.
• Debt Ratios: Debt-to-equity at 0.03 reflects negligible leverage, ensuring strong financial stability.
• Cash Flows: Dividend yield at 3.25% provides attractive shareholder returns, supported by consistent cash generation.

💹 Valuation Indicators

• P/E Ratio: 36.8, higher than industry PE of 26.4, suggesting premium valuation.
• P/B Ratio: Current Price / Book Value ≈ 14.3, trading at a steep premium to book value.
• PEG Ratio: 9.15, indicates valuation is stretched relative to growth prospects.
• Intrinsic Value: Based on EPS (₹44.6) and industry PE, fair value ≈ ₹1,175–1,200, below current price.

🏢 Business Model & Competitive Advantage

• HCL Technologies operates in IT services, software, and digital transformation solutions with global presence.
• Competitive advantage lies in diversified service offerings, strong client base, and high-margin digital services.
• High ROCE and ROE highlight operational excellence and sector leadership.

📈 Entry Zone & Holding Guidance

• Entry Zone: Attractive between ₹1,300–1,400, closer to 52-week low and intrinsic value.
• Long-Term Holding: Strong candidate for long-term investors seeking exposure to IT services, but valuation risk exists at current levels.

✅ Positive

• High ROCE (43.1%) and ROE (32.6%).
• Debt-to-equity ratio at 0.03 ensures financial stability.
• Dividend yield at 3.25% provides attractive income.
• DII holdings increased (+1.63%), showing domestic institutional confidence.

⚠️ Limitation

• P/E ratio (36.8) above industry average (26.4), suggesting overvaluation.
• P/B ratio ≈ 14.3, steep premium to book value.
• PEG ratio (9.15) indicates stretched valuation relative to growth.
• Quarterly PAT declined (↓ 8%) and YoY profit variation (-17.4%).

📉 Company Negative News

• FII holdings reduced (-1.92%), showing declining foreign investor confidence.
• Profitability under pressure with declining quarterly and annual earnings.

📢 Company Positive News

• DII holdings increased (+1.63%), reflecting domestic investor support.
• Strong fundamentals with high return ratios and consistent dividend payouts.

🏭 Industry

• Industry PE at 26.4, lower than company’s valuation.
• IT services sector benefits from global demand for digital transformation and outsourcing.
• Sector growth supported by cloud, AI, and cybersecurity services.

🔎 Conclusion

• HCL Technologies shows strong fundamentals with high profitability, low debt, and attractive dividends.
• Valuation is stretched compared to intrinsic value and industry peers.
• Entry recommended near ₹1,300–1,400; long-term hold viable for IT sector exposure with cautious outlook.