Emkay Global Financial's research report on HCL Tech
HCLT delivered a tad weaker-than-expected operating performance in Q4FY23 due to weak discretionary spending. Revenue declined 1.2% CC QoQ, impacted by seasonality in Software (-14.6% CC QoQ) and decline in ER&D (-3.8%). Services revenue grew by 0.6% CC QoQ in Q4, led by Financial Services (6.9%), HLS (3.6%) and Retail and CPG (0.6%), while Telecom (-5.6%), Manufacturing (-3.5%) and Technology (-1.6%) remained weak. Net new deal intake remained healthy at USD2.07bn in Q4, led by operating model transformation, cloud adoption and vendor-consolidation deals across Financial Services, Manufacturing and HLS. HCLT has guided 6-8% CC revenue growth for FY24 (implied CQGR of 1.4-2.1% over Q1-Q4) and EBITM of 18-19%. Management has guided for 6.5-8.5% growth in Services business in FY24, implying 1.4-2.2% CQGR over the next four quarters. It observed project cancellations and delays in decision-making/ramp-ups in discretionary spending, while RTB spending has not seen much stress.
Outlook
HCLT is well-positioned to weather the storm, given its comprehensive service offerings and well-balanced portfolio across RTB and discretionary spends. We have cut our earnings estimates by 1.9-2.8% for FY24E/25E, factoring in Q4 miss and higher ETR. We maintain our BUY rating with a TP of Rs1,150/share at 17x Mar-25E EPS (earlier 1,160).
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!
