Nomura Financial Advisory and Securities has reiterated 'Buy' on HCL Technologies with target price of Rs 1,730 from Rs 1,700 as against current market price (CMP) of Rs 1,425 with 21.4% potential upside in its report.
Commenting on the investment rationale, Nomura said, ''The strong traction in IMS (on share gains in deal rebids) and greater consistency in core software performance (a lagging segment in the past) give us comfort on our expectation of USD revenue CAGR of 15% over FY14-16F. Upside surprises to our growth expectations are possible as the CSC partnership (for legacy application modernization) starts to contribute.
In addition, the Street concerns of any dilution in margins due to INR appreciation are likely to be assuaged by better-than-anticipated margin performance driven by continuous improvement in IMS. IMS margins are now at par with core software margins.
Stock valuations at 13x FY16F EPS of INR112.3 are attractive. We reiterate our Buy rating and top pick status.''
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