Dolat Capital Market's research report on HCL Technologies
HCLT reported weak results with revenue growth of 2.5% in CC terms (DE 3.3%) and OPM at 16.6% (DE: 19.8%). Results performance was affected by weak revenues, impairment impact of $16mn in P&P segment. Guided strong revenue growth for FY22 with base growth of double-digit, which along with strong TCV data (Net New TCV at $7.3bn in FY21 – up 18% growth) implies potential for much wider growth print for the year. OPM guidance stood at 19%-21% is bit disappointing. Management has factored in some bit normalisation of discretionary cost savings and need for investments in new Geos and Mode 2 Digital offerings in the Engg Services as reason for the wider/lower band.
We believe strong double digit organic growth guidance backed by strong TCV/Pipeline, along with much improved FCF profile makes a strong case of re-rating of the stock and thus we maintain HCLT as our Top Pick with TP of Rs1,140 valued at 20x on FY23E earnings.