Buy HCL Technologies; target of Rs 1300: Dolat Capital

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Dolat Capital's research report on HCL Technologies

HCLT reported USD revenue growth of 2.1% QoQ (CC growth of 3% QoQ) to USD 2,099mn (DCMe: 2,106mn) primarily driven by healthy growth in IMS & ERD services. INR revenue grew 7.1% QoQ to ` 148.6bn (DCMe: ` 147.7bn) helped by INR depreciation. EBIT margin improved 22bps QoQ at 19.9% (DCMe: 20.5%) helped by INR dep (+90bps), Productivity improvement (+80bps) which was partial offset by negative impact of Wage hike (-70bps), SG&A expense (-50bps) and others (-30bps). PAT grew by 5.2% QoQ to ` 25.2bn (DCMe: ` 25.9bn) on back of lower forex gain during the quarter.

Outlook

The management maintained its revenue guidance for FY19 at 9.5%-11.5% in CC terms which translates to 8.2%-10.2% in USD terms. HCLT expects its revenue to be at the mid-point of the guided range; we have estimated USD revenue growth of 9% in FY19 driven by healthy recovery in IMS.

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