Buy HCL Technologies; target of Rs 1068: KR Choksey

KR Choksey's research report on HCL Technologies

Mode II and III services focus on new growth areas like Digital, Cloud, Security, IoT and Product & Platforms. Revenue from Mode II and Mode III services now account for 18.6% of overall services vs 15.9% in FY16 and grew at 31%. Expect HCL Tech’s focus on next-gen services to drive revenue growth above industry estimates at 12.3% CAGR between FY17-FY19E.

Outlook

We are also optimistic about penetration of Mode 2 and Mode 3 services and expect its contribution to total revenue to increase drastically going ahead. We have an “BUY” rating on the stock as we assign a multiple of 14x to its FY19E EPS to arrive at a price target of INR 1,068.