Buy HCL Technologies; target of Rs 615: Motilal Oswal

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Motilal Oswal 's research report on HCL Technologies

HCLT’s good execution despite the COVID-19 disruption in Mar’20 was impressive. Strong growth in Mode-2 (~7% QoQ, CC) and acquired IBM products reaching anticipated revenue run-rate (USD150-160m) were key positives. As expected, the company’s near-term outlook was cautious given the heightened uncertainty around demand, pricing and payment terms due to COVID-19. However, it is encouraging to note the healthy increase in order book (+12% YoY) and that supply-side issues are largely under control. We plan to keenly monitor the impact of strong cloud adoption on the IMS segment (~37% of revenue) and discretionary spending patterns in ER&D.

Outlook

Our estimates remain largely the same over FY20-22E. Maintain Buy as we expect HCLT to better navigate the current crisis and emerge stronger on the back of expected increase in enterprise demand for digital services.

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