Buy HCL Technologies; target of Rs 1119: KR Choksey

KR Choksey's research report on HCL Technologies

HCL Technologies Limited (HCLT) Q2FY23 performance was in marginally higher than our estimate. USD revenue grew by 1.9% QoQ, due to higher cross-currency headwinds. Revenue was up +3.8%QoQ CC, led by 5%+ sequential growth in both IT & BS as well as ER&D segments. Q2 revenue outperformance and H2 visibility syncs with upgrade in revenue guidance to 13.5-14.5% CC for FY23E (vs 12-14% earlier), including Services (ex-P&P) growth guidance of 16-17% CC. A few key drivers for HCLT are (1) confidence on the pricing front from caution shown in 1QFY23 and (2) stronger hiring numbers QoQ (driven by a big fresher hiring number) & a reversal of 1QFY23 numbers. HCLT’s margin will see traction in 3QFY23 (due to P&P spike) before it eases off seasonally in 4QFY23.

Outlook

HCLT believes that it is in a unique position for both cost-takeout and growth & transformation projects. Our target price of INR 1,119 is based on 20x Mar-24E EPS with EPS CAGR of 7.3% over FY22-24E.

More Info

At 12:12 hrs HCL Technologies was quoting at Rs 1,016.70, up Rs 34.65, or 3.53 percent.

It has touched an intraday high of Rs 1,023.00 and an intraday low of Rs 1,000.80.

It was trading with volumes of 124,645 shares, compared to its thirty day average of 238,515 shares, a decrease of -47.74 percent.

In the previous trading session, the share closed up 3.19 percent or Rs 30.40 at Rs 982.05.

The share touched its 52-week high Rs 1,359.00 and 52-week low Rs 875.65 on 13 January, 2022 and 29 August, 2022, respectively.

Currently, it is trading 25.19 percent below its 52-week high and 16.11 percent above its 52-week low.

Market capitalisation stands at Rs 275,898.33 crore.

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HCL Technologies - 141022 - kr