Buy HCL Technologies; target of Rs 1250: HDFC Securities

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HDFC Securities' research report on HCL Technologies

Revenue came at USD 2,278mn, 3.3/15.3% QoQ/YoY in CC. FY19 growth was 11.8% CC including 6.5% organic. FY20 guidance of 14-16% CC comprises organic guidance of 7-9%, an acceleration in organic growth trajectory supported by large deal wins, deal pipeline (10% YoY) and Mode-2 business. Inorganic contributions to include acquired IBM products (~6%) and other acquisitions (~1%) including Actian, H&D International and Strong-Bridge Envision. Strong growth in digital services (Mode-2) & legacy services (Mode-1) was offset by decline in products & platform (Mode-3) in 4Q. Within services, IMS (38.9% of rev) and Application services (24% of rev) were the drivers at 5.2% QoQ and 7.3% QoQ respectively, offset by decline in ER&D (IBM/Actian seasonality).

Outlook

We maintain BUY on HCL Tech following a slight beat in 4Q. Strong (inline) guidance offset by margin cut. Our TP is Rs 1,250, valued at 14x FY21E EPS.

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