HCL Technologies Ltd. is the cheapest stock on the Nifty IT Index—the best sectoral performer so far this year.
The stock of the country’s third-largest IT services company is trading at a 42 percent discount to the NSE Nifty IT index, according to Bloomberg data. “The discount is now too extreme relative to the growth differentials to peers,” brokerage HSBC said in a recent note.
The Noida-based tech company has the lowest valuation among its peers due to concerns over the long-term outlook for infra services and potential of its multiple intellectual properties deals, HSBC said. “Valuation discount appears to more than compensate for HCL Technologies’ recent earnings growth slowdown.”
The stock has underperformed the Nifty IT Index. It has risen nearly 4 percent, compared to the Nifty IT index’s 20 percent jump this year.
HSBC has upgraded HCL to ‘Buy’ from ‘Hold’ earlier. It has revised its price target to Rs 1,065, implying a potential upside of 17 percent for yesterday’s close.
Thirty of the 48 brokerages covering the stock have a ‘Buy’ rating, while six rate it ‘Sell’, Bloomberg data showed. The average return potential for the stock is 16.2 percent.
Shares of the IT company were trading over a percent higher at Rs 923.25 apiece in early trade today.