Buy HCL Technologies; target of Rs 1407: YES Securities

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YES Securities' research report on HCL Technologies

Overall, the financial performance was below expectation due to weak seasonality in Product and Platform segment. The P&P segment declined by 24% QoQ affecting the overall growth. However, the IT services segment(contributing 73% to revenue) continues to deliver among industry leading growth at 5.2% QoQ in Q4FY22. We expect revenue growth to be more predictable and robust going ahead as IT services contribution rises in revenue mix. Deal booking remains strong and that offers strong growth visibility for FY23. We expect it to maintain 18% + EBIT margin for FY23 led by improving employing pyramid and positive operating leverage. Employee attrition should come in control over next few quarters. We expect revenue CAGR of 15.4% over FY22‐24E, with average EBIT margin of 19.7% Valuation remains attractive as it trades at PE of 16.4x on FY24E EPS.

Outlook

We maintain BUY Rating on the stock with revised target price of Rs 1,407/share at 21x on FY24E.

For all recommendations report, click here

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