Comparing HCL Tech, Wipro, and Tech Mahindra: Deciding on the Best Investment Post-Q3 Results

The future looks uncertain for the IT industry in light of a downturn in demand in key Western markets and higher interest rates. Anticipated rate cuts, not due to commence until May, also dim prospects for a quick recovery in profitability for IT players.

HCL Tech’s Q3 result showed a consolidated net profit of ₹4,350 crore, growing 6.2% year-on-year and 13.5% sequentially. Revenues from operations also grew 6.5% YoY and 6.7% sequentially, with constant currency revenue growth at 6% sequentially and 4.3% YoY.

Wipro’s consolidated profit stood at ₹2,700.6 crore, up 1.2% QoQ but down 11.9% YoY. Its consolidated revenue from operations declined 4.4% YoY and 1.4% QoQ to ₹22,205.1 crore.

Tech Mahindra reported a 61% YoY decline in net profits, which dropped to ₹510.4 crore in the December 2023 quarter from ₹1,296.6 crore in the year-ago period. The revenue from operations also decreased 4% YoY.

According to analysts, HCL Tech and Wipro are more favourable options for investors compared to Tech Mahindra. Equity Analyst, CA Vatsal Vinchhi, observed signs of growth and stabilization in demand for HCL Tech and Wipro and recommended accumulating these two stocks on dips.

Dhruv Mudaraddi, a research analyst at StoxBox, also leaned towards HCL Tech due to its diverse revenue streams, strategic acquisitions, and operational management that create a positive outlook for growth.

Motilal Oswal Financial Services has a buy call on HCL Tech with a target price of ₹1,880, indicating that HCL Tech is expected to emerge stronger in the medium term due to healthy demand for its services, particularly in the cloud, network, security, and digital workplace sectors.

They have a neutral view on Wipro and Tech Mahindra, with the former expected to have weak revenue growth and a margin below the management’s guided range and the latter showing signs of weak growth in the near term.

The article concludes by advising investors to consult with certified experts before making any investment decisions.