Accumulate HCL Technologies; target of Rs 1210: Dolat Capital

Dolat Capital recommended Accumulate rating on HCL Technologies with a target price of Rs 1210 in its research report dated August 08, 2019.

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August 12, 2019 / 15:37 IST

26 Aug, 2025 12:21

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Dolat Capital's research report on HCL Technologies

HCL Tech reported strong revenue performance in Q1FY20 with a 4.2% CC terms QoQ growth in revenues, with almost 88% of the incremental revenue contribution being organic (our estimate at 2.4%). Profitability however was lower than expectation with a 190bps QoQ decline at 17.1% as against our expectations of 90bps cut on account of unexpected hit of ~110bps in the Engg R&D segment. Despite the slip in OPM performance in Q1, Management has retained its guided band of 18.5%-19.5% as it expects reversal on several one-time headwinds in Q1 and also integration of high-margin IBM product revenues in Q2 (incremental revenues of about US$135mn and OPM of ~30%). Strong organic growth performance in Q1 would imply that HCL Tech would clock sector-leading growth even on organic basis which make us believe that the stock could see significant potential re-rating as it recoups its profitability.

Outlook

We maintain our ACCUMULATE rating on the stock and TP of ` 1,210 (valued at 14x FY21E earnings).

For all recommendations report, click here