Buy HCL Technologies; target of Rs 1333: Religare Retail Research

Religare Retail Research report on HCL Technologies

HCL Tech Q1FY24 revenue came in below our expectation. It posted revenue at Rs 26,296cr, down by 1.2% QoQ and up by 12.1% YoY while revenue in USD stood at 3,200mn, de-growth of 1.1% QoQ and growth of 5.8% YoY. In constant currency, revenue was down 1.3% QoQ and up by 6.3% YoY. Overall revenue was impacted due to de-growth in both service and software business. Its service business which clocks in at 90% revenue de-grew by 1% QoQ and grew by 7% YoY in CC terms while remaining 10% of business from the software segment saw a de-growth of 3.1% QoQ while flat YoY in CC terms. Amongst verticals mixed trend was seen wherein growth was led by Financials, manufacturing and retail segments which were up by 5.1%, 3.6% and 0.3% QoQ in CC terms while de-growth in Technology, life science & healthcare and media & communication impacted sentiments.

Outlook

Further, HCL is trading at comfortable valuation and we have assigned a P/E of 18x FY25E EPS and have maintained a Buy rating with a target price of Rs 1,333.