Buy HCL Technologies: target of Rs 1200: Sharekhan

An Edelweiss research report for Q4FY21 says road tonnage continued to improve, evident in e-way bill generation (up 6% QoQ) and improved core trucking rentals. “We estimate tonnage would increase by three–five percent for truckers. Asset-light plays Mahindra Logistics and TCI Express remain our preferred picks due to their ability to scale up/down as the environment demands,” the report said. Edelweiss is bullish on Blue Dart Express due to the pandemic-induced boom in e-commerce and its leaner cost structure. It has retained a ‘buy’ call on Mahindra Logistics, TCI Express and Blue Dart Express.

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Sharekhan's research report on HCL Technologies

Q4 numbers missed headline estimates; but deal bookings, employee additions and healthy cash generation remained impressive; EBIT margins shrunk by 260 bps q-o-q owing to a wage hike and a seasonal decline in the product business. The management guided for a double-digit revenue growth on CC terms (versus our estimates of 10-12%) and OPM of 19-21% (versus our expectations of 20-21%). Margin likely to be affected owing to investments in geographies, capabilities and talents. Expect strong double-digit revenue growth in FY2022 despite lower growth in product business, driven by robust deal wins, deal pipeline and rising spends on transformation initiatives by clients.

Outlook

We maintain a Buy rating on HCL Technologies with a revised PT of Rs. 1,200, given clients’ rising spends on Cloud-related technologies and reasonable valuations.

For all recommendations report, click here

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