Prabhudas Lilladher's research report on HCL Technologies
We attended investor day of HCLT, the management was confident of continued executions of strong operating performance while having offered service lines within a scope of both discretionary and non-discretionary front. It is aspiring to grow its topline by double-digit for the next five years, while improving its TCV run-rate and going beyond the current offerings where the participation is currently suboptimal. While leveraging GenAI solutions, the company is gaining higher mind-share and wallet-share on the back of passing on efficiency and productivity benefits to clients and in return deriving higher scope of work. With its strong capabilities on the key verticals BFS and TMT, which have delivered CQGR of 1.4% and 1.8% over 1QFY23- 4QFY24, are expected to further outgrow its peers in the future course. However, the verticals that are sensitive to the interest rates and consumer spends, are expected to grow below consolidated business growth in the near-term. On the margins front, pyramid rationalization, G&A optimization through GenAI, and growing nearshore/offshore deliveries would help flex better margins and deliver within the guided band of 18-19%.
Outlook
We rollover our estimates and introduce FY27 with USD revenue and INR PAT CAGR of 10.9% and 12.9% over FY25E-FY27E. Maintain BUY with a revised target price of Rs1,960, implies target PE multiple of 24x FY27E EPS.
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