Buy HCL Technologies; target of Rs 1350: Dolat Capital

Dolat Capital is bullish on HCL Technologies has recommended buy rating on the stock with a target price of Rs 1350 in its research report dated January 29, 2019.

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February 04, 2019 / 13:24 IST

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Dolat Capital's research report on HCL Technologies

The management maintained its revenue guidance for FY19 at 9.5%-11.5% in CC terms, which translates to 7.9%-9.9% in USD terms. HCLT expects its revenue to be at the upper end of the guided range. We estimate a USD revenue growth of 9.7% in FY19, driven by healthy recovery in IMS and the core business (Mode 1). HCLT believes that organic component will contribute more, as compared to inorganic growth in FY19. On the its upper end of the guided range, organic growth would be around 6.5% and remaining 5% would be inorganic. During the quarter, HCLT signed 17 transformational deals that should help drive revenue growth. The management has maintained its EBIT margin guidance of 19.5%-20.5% for FY19. We expect HCLT to report margins in the midpoint of its guidance, due to continuing investment in Mode 2 and Mode 3 services. HCLT is trading at fair valuations of 11.3x/9.9x, based on FY20/FY21 earnings estimates.

Outlook

We upgrade our earnings estimates by 1.8%/3.3% for FY20/FY21, factoring likely future margin improvement. We maintain our BUY rating, with a revised TP of ` 1,350, based on 14x one-year fwd. PER.

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