Sharekhan's research report on HCL Technologies
HCL Tech reported strong revenues of $3,415 million, up 6% q-o-q/4.3% y-o-y in constant currency (CC) terms beating our estimates of 4.4% q-o-q CC led by ERS, HCL Software and IT services, which grew 8.7%/32% and 1.9%, q-o-q respectively in CC terms. EBIT margins improved ~130 bps q-o-q to 19.8% owing to outperformance from the software (180 bps) that was offset by services margin (50 Bps) despite wage hike and furloughs. New deal win TCVs stood at $1,927 million, down 51%/18% on a q-o-q and y-o-y basis, respectively. FY24 CC revenue growth (including ASAP acquisition) guidance narrowed to 5-5.5% at company level as well as for Services segment. Ask rate for Q4FY24 at 0.3 to 2.1%, and 1.6 to 3.5% at services level.
Outlook
We believe HCL Tech is well-equipped to maintain its growth leadership among large peers in the medium term given the diversified portfolio that is well-aligned to growth areas and strong execution. Hence, we maintain Buy with revised price target (PT) of Rs 1,780. At CMP the stock trades at 22.5/19.1x its FY25/26E EPS.
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