Buy HCL Technologies; target of Rs 1101: Prabhudas Lilladher

Prabhudas Lilladher's research report on HCL Technologies

HCLT reported strong revenue growth of 4.5% QoQ CC (Ple & Cons: 3.7%) & 6.4% QoQ ahead than our & street estimates. HCLT reported broad-based QoQ growth – IT services (+4.9%), ERD (+3.6%) and products (+3.1%) CC terms. HCLT Q2 growth exceeded their mid quarter guidance of ~3% QoQ CC. Margin expansion was strong at 21.6% (+110bps QoQ) which was aided by i) revenue growth, higher utilization & lower travel spends (+150bps QoQ), which was subset by SG&A investments in P&P business, forex & depreciation (- 50-60bpsQoQ).

Outlook

We value HCLT at 20X (earlier 19X) on Sep-22 EPS of INR 55.1 to arrive at a changed TP of INR 1101 (Earlier: INR 1029). HCLT is trades at attractive valuations of 15.6/14.6X for FY22/23 at INR 53.3/57 respectively.

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