KR Choksey's research report on HCL Technologies
HCL Technologies concluded FY24 with a weak performance. Its revenue growth fell short of our estimates by -2.4%. This was primarily attributed to decreased revenue from the ER&D and Software segments. The Company reported revenue of INR 284,990 Mn (+7.1% YoY), which missed our estimates by 2.4%. EBIT came in at INR 50,240 Mn, which grew by a lower-than-estimated 3.9% YoY. The miss is primarily due to a significant increase in employee benefit expenses. Net profit grew 0.1% YoY to INR 39,860 Mn, a 2.7% miss from our estimate of INR 40,952 Mn. This miss was primarily due to weak operating performance and an increase in finance costs. We lower our FY26E EPS, the corresponding multiple, and our Target Price due to the weak management guidance. We reiterate our ACCUMULATE rating as the share price pullback can be used to add positions, in our view.
Outlook
However, given that the Q4FY24 results, and guidance surprised negatively, we lower our multiple to 22.0x (previously: 24.0x) on our lowered FY26E EPS. We reduce our TP to INR1,546 (previously: INR 1,756). We retain our "ACCUMULATE" rating on HCL Tech as we believe that the recent correction in the stock price offers an opportunity to add a position in the stock.
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