Motilal Oswal's research report on HCL Technologies
HCL Technologies (HCLT) reported weak 4QFY24 performance with 0.3% QoQ CC consolidated revenue growth, below our estimate of 0.9% QoQ CC.The weak performance was due to the seasonality in HCL Software (-18.5% QoQ CC) coupled with weakness in ERS (1.6% QoQ CC), while ITBS posted an impressive 4% QoQ growth in CC. Services grew 3.0% QoQ in CC, above our estimate of +2.7% QoQ. The new deal TCV was healthy at USD2.3b (+18.8% QoQ/10.4% YoY) in 4QFY23. HCLT announced disappointing revenue growth guidance of 3-5% CC for FY25, amid weak 1QFY25 expectations (-2% QoQ). The weak expectations are led by the offshoring of a large deal and the transfer of productivity benefits to clients. EBIT margin came in lower than expected at 17.6% (-220bp QoQ; missing our estimate of 18.5%) due to the HCL Software seasonality. Services margin contracted 70bp QoQ. Management retained its EBIT margin guidance band of 18-19% for FY25.
Outlook
we expect HCLT to emerge stronger on the back of healthy demand for these services in the medium term. The stock is trading at ~20x FY26E EPS, which offers a margin of safety. Our TP of INR1,700 is based on 23x FY26E EPS. We reiterate our BUY rating on the stock.
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
