MOFSL on Wednesday maintained a ‘Buy’ rating on HCL Technologies Ltd despite soft FY27 guidance and muted March quarter results. It also reiterated a ‘Buy’ rating on Persistent Systems following a soft exit on core growth, but retained a ‘Sell’ call on Tata Elxsi, citing deal ramp-up delays that weighed on Q4 growth and a guidance reset amid uneven vertical recovery. The domestic brokerage's target prices suggested a 15-16 per cent upside potential for HCL Tech and Persistent Systems, and a 28 per cent downside potential for Tata Elxsi.
 
HCL Technologies Ltd | Target price: Rs 1,650 | Upside potential: 15%
MOFSL said HCL Tech's FY27 guidance of 1-4 per cent YoY CC reflects a combination of client-specific disruptions in March and sharp discretionary cuts by two large US clients in the telecom segment. In addition, two large client-specific headwinds, including one retail and one manufacturing, are expected to create 50 basis points drag on services growth in FY27. 

"Europe remains weak due to geopolitical issues, while North America is stable barring these client situations. Software weakness was also led by deal deferrals (the US government shutdown and West Asia crisis)," the brokerage said.

MOFSL said HCL Tech stock's premium multiple is premised on the fact that it can grow faster than other largecaps. But at the midpoint, that growth premium disappears. 

"We now expect 3 per cent services growth (organic). Importantly, the full impact of the client-specific issues is yet to play out, and we expect 1H to be soft. This, along with a lower-than-expected improvement in FY27 margins, would put HCLT's EPS growth premium at risk in the near term," MOFSL said.

That said, MOFSL believes HCL Tech's exposure to ER&D, chip design, and infrastructure management makes it relatively more resilient against application-heavy peers. It has played out in previous downcycles, and MOFSL continued to hold the thesis despite Q4 results.

Persistent Systems Ltd | Target price: Rs 6,200 | Upside potential: 16%

MOFSL said Q4 marked the fifth straight quarter of deceleration in revenue growth for Persistent Systems, excluding software licenses, even as it remained one of the fastest-growing IT services companies in its coverage. The broking firm said the March quarter revenue grew 3.4 per cent QoQ in constant currency (CC) terms, a slight miss on consensus numbers. Revenue growth (excl. software licenses) continued to soften, with 15 per cent YoY growth in 4Q. 

"We now build in 16 per cent Dollar revenue CAGR over FY26-28E for Persistent Systems, reflecting moderation in core growth. Along with gradual margin expansion, this translates into 20-22 per cent EPS CAGR, still among the stronger growth profiles in mid-tier IT, though lower than earlier expectations," MOFSL said.

The broking firm has cut its earnings estimates by 4-5 per cent, factoring in a soft 4Q exit and continued reinvestments in AI platforms and consulting capabilities. It now builds in a more gradual margin expansion of 16.7-16.8 per cent over FY27-28E. 

Tata Elxsi Ltd | Target price: Rs 3,350 | Downside potential: 28%

While Q4 saw modest growth, Tata Elxsi's outlook has turned more conservative, with FY27 growth guided to be in high-single digits amid delayed deal closures and elongated decision cycles. 

"Growth remains dependent on ramp-up of existing deals and Transportation-led momentum, while Media and Healthcare recovery is gradual. We expect dollar revenue growth to remain moderate at 7 per cent CAGR over FY26-28. We have modestly revised our estimates for FY27/FY28 by 1 per cent," MOFSL said.

It said margin expansion is expected to be gradual and back-ended, with EBIT margins expanding to 23.7 per cent.

MOFSL noted that Tata Elxsi's revenue growth of 0.9 per cent QoQ CC reflected a subdued exit, with delays in deal closures and elongated decision cycles weighing on momentum. While deal wins continued, conversion into revenue remained uneven, indicating a mixed demand environment, it said.

"Deal wins intact, but ramp-up timing is key: The company continues to win across verticals, including new logos in Transportation and a large consolidation deal in Media & Communication. However, new deals typically take 9-12 months to scale, and some Healthcare deals slipped into 1Q. We believe growth in FY27 will be driven by the ramp-up of existing wins and wallet share expansion," it said.