Buy HCL Technologies; target of Rs 980: Sharekhan

Sharekhan's research repor on HCL Technologies

Q2 performance was strong, with numbers beating estimates on all fronts; EBIT margin expanded by 108 bps q-o-q to 21.6% (highest over last 22 quarters); deal signings, deal pipeline and FCF generation remained strong. The management provided revenue growth guidance of 1.5% - 2.5% q-o-q for Q3 and Q4 of FY2021, translating to a growth of 0-0.7%. Increased margin guidance to 20-21% from its earlier guided band of 19.5-20.5%. Strong order bookings, healthy deal pipeline and consolidation opportunities in both Infra and application modernisation spend of clients are expected to drive the company’s growth going forward.

Outlook

We stick to our Buy rating on HCL Technologies (HCL Tech) with a revised PT of Rs. 980.