Buy HCL Technologies; target of Rs 1260: HDFC Securities

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HDFC Securities' research report on HCL Technologies

HCL Tech (HCLT) posted in-line revenue (IMS recovered) with slightly better operating performance. Guidance/margin unchanged, however outlook (ex-2 BFSI accounts) stronger with improved pipeline, wins and renewal cycle. Revenue came at USD 2,099mn, 3.0/10.5% QoQ/YoY in CC terms. EBIT margin stood at 20%, +29bps QoQ with INR depreciation and productivity gains (automation, utilisation) offset by wage increase and product seasonality impact. Margin improvement was supported by operational improvement in Mode-1 business. APAT came at Rs 25.40bn, 5.7/16.1% QoQ/YoY.

Outlook

We’ve factored 8.5/8.6% CAGR for software services (incl ER&D) and IMS, respectively. Maintain BUY with TP of Rs 1,260 (15x Sep-20E).

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