Buy HCL Technologies; target of Rs 900: Sharekhan

Sharekhan's research repor on HCL Technologies

Mid-quarter update raises revenue and margin guidance for Q2FY2021, driven by better-than-expected execution, pick-up in discretionary spends that were held up, and return of normalcy in certain pockets. Given strong capabilities in IMS, HCL Tech would continue to win consolidation deals with application components; The acquisition of DWS would further expand its digital offerings, especially in the APAC region. With no pending IBM-IP acquisition-related payments along with limited capex obligations, we expect free cash flow generation to improve going forward, which could lead to improvement in payout ratio.

Outlook

We maintain our Buy rating on HCL Technologies (HCL Tech) with a revised PT of Rs. 900.