Get App
Last Updated : Aug 12, 2019 03:59 PM IST | Source:

Buy HCL Technologies; target of Rs 1250: HDFC Securities

HDFC Securities is bullish on HCL Technologies has recommended buy rating on the stock with a target price of Rs 1250 in its research report dated August 08, 2019.

Broker Research @moneycontrolcom
  • bselive
  • nselive
Todays L/H

HDFC Securities' research report on HCL Technologies

Rev came higher than est. at USD 2,364mn, a strong 4.2% QoQ CC which included 3.7% organic (supported by early ramp-up of large deal) and 0.5% from Strong-Bridge Envision consolidation. Acquired IBM products and other inorganic (Actian, H&D, Strong Bridge) expected to contribute ~6.5% to FY20 rev growth. HCLT maintained its FY20 rev guidance at 14-16% CC, implying ~8-10% organic growth. Mode-2 biz (18.8% of rev) decelerated to 3.6% QoQ, however Mode-1 delivered strong growth of 4.1% QoQ. Service segments reclassified into IT & Business services (75.3% of rev and 3.6% QoQ), ER&D (16.9% of rev and 5.6% QoQ) and Products & Platform (7.8% of rev and 7% QoQ). HCLT has lower risk (vs. peers) from adverse H-1B regulations with US localisation at 70%. Margin performance was lower with EBIT% at 17.1%, -193bps QoQ (17.5% est) impacted by lower gross margin (-130bps impact) and higher SG&A (-50bps impact). Margin was impacted by onsite heavy ER&D, investments to build front-end/HCL Software division and INR/Visa cost impact. Mode-1 margins moderated while Mode-2/3 margins were flat QoQ. APAT at Rs 22.20bn was impacted by higher ETR.


We maintain BUY on HCL Tech (HCLT) following a strong revenue and tad lower margin performance. Organic growth momentum is strong and integration of IBM products (key monitorable) will keep growth at top-end of guidance and margin at the lower end. Our TP is Rs 1,250 at 14x Jun-21E EPS.

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on are their own, and not that of the website or its management. advises users to check with certified experts before taking any investment decisions.

Subscribe to Moneycontrol Pro and gain access to curated markets data, trading recommendations, equity analysis, investment ideas, insights from market gurus and much more. Get Moneycontrol PRO for 1 year at price of 3 months at 289. Use code FREEDOM.
First Published on Aug 12, 2019 03:59 pm
Follow us on
Available On
PCI DSS Compliant